2 Alternative REITs To Annaly Capital And Chimera

Includes: ARR, CIM, NLY, WHX
by: Matt Schilling

The Real Estate Investment Trust, or REIT, market has seen some considerable declines in such stocks as Annaly Capital Management (NLY) which is down almost 20% since its September 20011 highs and Chimera Investment Group (CIM) which is down 25% since its April 2011 highs. After doing some research I've found two REITs that will certainly make any portfolio pop.

ARMOUR Residential REIT, Inc. (ARR) - ARR currently trades at $6.80/share in a 52-week range of $5.40-$7.78. The stock currently yields a whopping 17.6%, and pays a monthly dividend of $0.10/share ($1.20/share annually).

Analysis: Even though investors may be worried about how long ARR can sustain its high dividend payout, they shouldn't be too worried about ROI. The stock currently trades at near $7/share levels and has paid a very nice dividend since March 2010. ARR invests in residential mortgage-backed securities which are guaranteed by the US Government or a US Government backed entity. That being said, ARR could see some significant increases in its dividend distributions and shareholder ROI because of the increased amount of borrowers being able to both purchase and refinance homes through such programs as HARP.

Whiting USA Trust I (WHX) - This Austin, Texas based REIT currently trades around $17/share and yields roughly 16.8%. They have paid a quarterly distribution in February, May, August and November ever since 2010. The last four quarterly distributions (May 2011, Aug. 2011, Nov. 2011, and Feb. 2012) have been higher than the previous four quarters (May 2010, Aug. 2010, Nov. 2010, and Feb. 2011) from the same period in the prior year.

Analysis: Whiting USA Trust I is a fantastic REIT, not only because of its high yield but because of its interests in oil and natural gas based properties. "Whiting Petroleum Corporation's wholly-owned subsidiaries, Whiting Oil and Gas Corporation and Equity Oil Company, conveyed a term net profits interest to the trust that represented the right to receive 90% of the net proceeds from Whiting's interests in certain existing oil and natural gas producing properties"(I). This sets itself apart from your traditional REIT, and only goes to show investors how important alternatives to mortgage back securities are. One very interesting prospect is that Whiting enters into hedge contracts that are designed to hedge 80% of the anticipated production from both oil and natural gas on its properties.

For the long term high yield investor both stocks are very good long term plays, with consistent earnings and fantastic yields. Acquiring larger stakes in either company would be a great idea especially if you're looking to build wealth from both growth and dividend stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.