5 Highest-Yielding Mortgage REITs With Buy Ratings

Includes: ANH, CYS, RWT, STWD, TWO
by: Dividend Stocks Online

Real Estate Investment Trusts [REITs] are an important part of every diversified dividend portfolio. Equity REITs allow investors to get exposure to physical properties while mortgage REITs offer exposure to mortgage investment. They often come with high dividends yields because REITs must pay 90% of their income back to shareholders.

We went through analysts ratings to find which of the highest yielding REITs are currently rated as a buy. We found 5 REITs with a dividend yield over 9% that are rated a buy. Analysts ratings and price targets are never a guarantee of future performance, so be sure to do your own homework before making any investment decisions.

When buying REITs or any other dividend stock, it is important to consider the safetly of the dividend yield as well as capital appreciation potential. We believe that the following REITs offer potential value based on current market conditions.

Two Harbors Investment Corp – (NYSE:TWO)

Two Harbors is a Mortgage REIT that currently has a buy rating with six analysts rating the stock a strong buy, one with a buy and one with a hold. Two Harbors invests in and finances residential mortgage-backed securities in a variety of asset classes.

TWO has a dividend yield of 18%. It started paying dividends in 2009 and raised the dividend by 20% in 2011. The stock is down 9% year to date.

Anworth Mortgage Asset Corp – (NYSE:ANH)

Anworth Mortgage is a Mortgage REIT with 15 analyst ratings. Three rate it a strong buy, six a buy and six a hold. Anworth invests mostly in U.S. agency mortgage backed security. Mortgage derivatives may not exceed 10% of their portfolio.

ANH has a dividend yield of 15.8%, but has cut its dividend in 2010 and 2011 after raising the dividend by over 35% in 2009. It has been paying dividends since 1998.

Starwood Property Trust – (NYSE:STWD)

Starwood is a mortgage REIT with 8 analyst ratings. Five analysts rate the stock a strong buy and three have it rated a buy. No analysts recommend holding or selling the stock. Starwood originates finances and manages commercial mortgage loans. It also invests in other commercial real estate debt and mortgage-backed securities.

STWD has a dividend yield of 9.7% and they raised their dividend in 2011 by almost 100%. They have only been paying dividends since 2010.

Redwood Trust – (NYSE:RWT)

Redwood is a mortgage REIT with nine analyst ratings. One analyst has it as a strong buy. There are five analysts buy ratings, two with hold ratings and one with an underperform rating. Redwood invests in residential and commercial real estate loans. It also originates and underwrites commercial mezzanine loans and stabilized assets.

RWT has a dividend yield of 10.2% and raised the dividend by 25% in 2011. The increase was due to an extra dividend payment in addition to the normal quarterly schedule. Before this increase in 2011, the dividend has been cut significantly year after year since 2007.

CYS Investments – (NYSE:CYS)

CYS Investments is a mortgage REIT with 10 analyst ratings. Eight analysts have it rated a strong buy, one has it as a hold and one as a strong sell. Most recently, Compass Point initiated coverage on November 10th, 2011 with a buy rating. CYS has a goal to achieve consistent risk-adjusted investment income for its shareholders. They generate this income by investing in fixed rate residential loans and ARMs.

CYS has a dividend yield of 18.6% and has been paying dividend since 2009. It cut its dividend in 2011 by over 30%.

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