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3 Of My Biggest High-Yield Positions


  • We have allocated 5% or more of our total portfolio to each of these shares individually.
  • Since we focus on investing in REITs and some REIT preferred shares, we have a more heavily concentrated portfolio than most investors.
  • Each share offers a yield greater than 6%.
  • This idea was discussed in more depth with members of my private investing community, The REIT Forum. Learn More »
2022 prosperity year concept

The dividend yield on these stable shares should help Seeking Alpha readers find peaceful income.

Pogonici/iStock via Getty Images

Get ready for charts, images, and tables because they are better than words. The ratings and outlooks we highlight here come after Scott Kennedy’s weekly updates in the REIT Forum. Your continued feedback is greatly appreciated, so please leave

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This article was written by

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Colorado Wealth Management is a REIT specialist who began his decades-long investment career in a family-owned realtor office before launching his own company and embracing his drive for deep-dive REIT analysis. He passed all 3 CFA exams. He focuses on Equity REITs, Mortgage REITs, and preferred shares.

Features of the group include: Exclusive REIT focus analysis, proprietary charts and data models, real-time trade alerts posted multiple times a month, multiple subscriber-only portfolios, and access to the service's team of analysts and support staff for dialogue and questions on the REIT space.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AGNCO, CIM-A, ARR-C, DX-C, NRZ-D, AGNCP, MFA-C, NYMTZ, TWO-B, NRZ, SLRC, AAIC, PMT, ARCC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Colorado Wealth Management Fund and Scott Kennedy are supporting contributors for The REIT Forum. Our ratings and outlooks will often overlap. Any recommendation posted in this article is not indefinite. We closely monitor all of our positions. We issue Buy and Sell alerts on our recommendations, which are exclusive to our members. I have an indirect conflict of interest with ABR and STWD. Neither I, nor any contributor for The REIT Forum, will provide investment advice, reply to questions, or engage in discussions regarding these two mREIT stocks.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (40)

ijeff profile picture
I'm fairly new to preferred stocks and I was wondering if there is a chart somewhere that explains what the various risk levels are?
Retire2020 profile picture
From your BDC charts, AINV seems to be of good value. The question is whether it is a trap?. Thanks.
birder profile picture
NRZ-D has not been performing well.
@birder Which has been awesome for those of us establishing a position.
Surrealknyte profile picture
A great article for someone new to investing in preferreds. Thanks for taking the time to share this great information to do our research on!
best author on SA.
Augustus profile picture
Please clarify something on taxes on these dividends.
I believe that these dividend payments are taxed t ordinary income, same as interest income. No adjustment in rate for "Qualified Dividends" that may apply to something such as ABBV.
PMT-C seems a solid pick, thanks. The current yield of 7.35% is good enough for me, though fixed rate. ARR-C pays monthly, but the company is a lot smaller and on shakier fundamentals.
Jimmy Grisham profile picture
Excellent article and analysis! Top notch logic backed up with data. Lately, I am amazed at the number of securities you profile that I actually own. I currently own 3 baby bonds, 12 preferreds, 4 mREIT commons, 6 eREIT commons, and 1 BDC, and all but a few show up regularly in your articles. some positions have become quite large, but bargains still exist, and I am still buying. Several orders for next week already entered, we'll see.. Thanks for the coverage.
2bears profile picture
This is the most valuable free content on SA, thank you for sharing.
@2bears agree! And frequency is great!
Landlord Investor profile picture
It will be very interesting to see what happens if Libor goes to say 2% in the next year and FTF preferreds like NLY-F yield 7% (assuming it moves to par by then) with Libor headed higher while fixed rate preferreds like ARR-C yield a similar amount with less safety. If Fed neutral rate is 2.5%, NLY-F will eventually be yielding close to 7.75%. If it’s not called, every other mREIT preferred will look bad in comparison.

ARR-C was issued when the 10 year was around 1.85%. Hard to justify par on it with the 10 year at 2.4%. I own it but reducing.
As always Ex-Cell-Lent snapshot in real time.
Allocation is warranted.
RE sector performance, at least in our portfolios, has made total gains outsized since becoming subscribers.
Volatility outside RE sector proved Scott Kenndy's analysis and business model to be best investment baseline research in years.
Best move was stepping out on his own.
i like most of your analysis but the one thing I can't wrap my head around is buying issues because they are a lot below par even though they are slightly weaker in every other category. I generally stick with Yield, Yield-to-worst and floating rate with little concern for how more much upside there is if the stars all align.
@rbow He's seeking alpha
@rbow Trading below par is attractive if you like the current yield, because it will not be called so you will continue to receive the yield payout, or if it is called you get a bump-up to par. The biggest fear among REIT commons is dividend cuts, but that's not a risk for preferreds (unless the company goes bankrupt).
Surrealknyte profile picture
@SteveInAtlanta Thanks for this info :)
LuthervilleMD profile picture
A small thing but I believe that MFA-B is already callable (4/15/2018) rather than the 4/19/2022 you have in the chart above. Am I missing something?
2bears profile picture
@LuthervilleMD according to the prospectus you are correct.
@LuthervilleMD The call date shown is probably the earliest date the shares could be called, as of the original publication date, considering the required notice of call. I haven't checked but imagine the prospectus provides for 30-day notice of call.
LuthervilleMD profile picture
@dinglefritz Thanks, I was oblivious about the effect of a call notice. I was just thinking the issue could be called at any time after 4/15/2018 and didn't connect the date in the chart being less than 30 days out. You cleared things up nicely.
Always enjoy your articles... even though it's still a bit over my head. :) If mREITS are expected to continue taking a big hit as interest rates rise, my AGNC is down quite a bit, would the same be expected for their preferred bond prices? Preferred's are my topic to learn this year, I didn't want to a new position this year and add to what I have, but wondering about the relative safety of preferred's and if that should be the exception. Thanks for your articles... I'll better understand them soon!
Throwing Ketchup profile picture
Don't we love when someone recommends what we already own? It makes me feel all warm and cozy...
Colorado Michael,

Thanks for your Preferred Share analysis and submitting your article for public viewing.

Curious as to your current Portfolio percentage in cash.

Also what percentage of your disclosed positions are allocated to preferreds vs. your NRZ,SLRC, PMT, AAIC and AARC common shares? Thanks.

Dividend Digging Armadillo
Baja Oklahoma
Colorado Wealth Management Fund profile picture
@Dividend Digging Armadillo My cash allocation today is less than 1%.
Opportunities during March were simply too good to pass up.
Colorado Wealth Management Fund profile picture
@Dividend Digging Armadillo mREIT and BDC common shares combine to be about 10% (rounded). Preferred shares come in at about 33% (rounded).
@Colorado Wealth Management Fund
Thank you sir!

Are you optimistic on Rockies 2022 season sans Story and Gray?
I think this is some of the best analysis on SeekingAlpha. I appreciate the free articles be published, so this is a bit nitpicking. I disagree that any mREIT preferred, including AGNCP, should get a risk rating of 1.

Credit risk is almost nonexistent, but there is certainly interest rate, liquidity, and leverage risk. The floating rate of 6.03% means that the price will have to decrease if AGNCP is going to maintain its 6.5% yield. Or interest rates will have to rise and the market would likely require a higher yield as any competitive newly issued securities would have a higher interest rate.

Liquidity risk shows up at the worst time. If there is a steep drop in the market while AGNCP is floating, the fed will lower SOFR. AGNCP yield will drop and it will be difficult. Hopefully you won’t need to exit the position on a down day, because the bid side of the order book is pretty thin.

AGNC is levered anywhere from 7-11x. It’s a small probability, but a mistake in hedges can bring the solvency into question.

I agree that AGNCP is lower risk than most mREIT preferreds and is the best option of AGNC and NLY various series. I only disagree with calling it a risk rating of 1. Investors should be aware of the risks.
Colorado Wealth Management Fund profile picture
@Rule of 72t I agree that those are risks. I take liquidity risk into effect in the context it has on price volatility, but that's it. If someone wants to shove 200,000 shares through, I expect them to already know about the issue. Shares have usually been quite stable in share pricing, though they did all take a hit during the pandemic.

I hear a great deal about how prices will have to come down for AGNCP to maintain the same yield, but 3-month rates are closer to 1% while rates 2 to 3 years out are implied (using Treasuries) around 2.5% to 3%. You can get a feel for the implied rate in year 3 by looking at the difference between the 2-year Treasury at 2.46% and the 3-year Treasury at 2.638%. That spread implies (as if markets were actually efficient) that the 1-year rate in the final year would need to be just slightly under 3%. I'm not running the figures through Excel right now, just estimating.

If that comes to pass, the same argument would be that AGNCP's price would have to increase substantially to maintain the same yield. Personally, I don't think prices will be tied that closely to yield, though it will be one relevant factor.

Since AGNCP has a shorter history, I'll use an alternate share. The 10-year Treasury maxed out around November 2018 at a bit over 3.2%. NLY-G traded at around $24.00. Outside of the pandemic panic, those shares rarely traded outside a range of $23.00 to $26.00. Yet the 10-year yield fluctuated from over 3.2% down to about 0.5%, and back up to about 2.5%.

Is it really reasonable to believe the share price will change the day the shares switch over to a floating rate? There might be some impact. I've certainly heard plenty of investors claiming that they would simply dump their shares right before the floating rate started on the belief that the market would remain ignorant of this fact until the 11th hour.

I suspect instead we will see share prices adjusting more leading up to that final period, though there still might be some adjustment at the end. Regardless, if the share price stays the same and the Federal Reserve continues to hike rates, the value shown for "Floating Yield on Price" is going to soar.

Within 6 to 12 months (4 hikes) the higher short-term rates would drive that "Floating Yield on Price from 6.04% to about 7.1% or 7.2%, which is significantly higher than the stripped yield of 6.54%.

Regarding AGNC's leverage, please show me the agency mortgage REITs (not non-agency) that went bust and failed to pay their preferred shareholders. Even with significant leverage, it takes a BIG mistake to wipe out the common shareholder. Even during the pandemic, they were a LONG ways away from wiping out the common shareholders. That was during a time when the head of the FHFA, in my opinion, was either severely incompetent or actively seeking to destroy some companies so he could leverage his position to transfer assets to other companies. In my opinion, "both" is also a viable answer. In my opinion, his removal has reduced risk in the system.
@Colorado Wealth Management Fund Thanks for the thorough counter arguments. I will admit I was invested in NLY common from 2007-2009 and its solvency was significantly less in question than the big banks.
Thanks @Colorado Wealth Management Fund , I've taken 3 immediate actions based on this advice!
Colorado Wealth Management Fund profile picture
@MegaDivGuy Thanks. Glad you enjoyed it and found it useful.
Mscape profile picture
Excellent article and analysis. Very useful. Thank You.
Colorado Wealth Management Fund profile picture
@Mscape You're welcome. Thank you for leaving a comment, especially such a kind one.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

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