4 Picks For 10% Dividend Yields

Summary

  • Each pick offers investors a big yield and capital appreciation.
  • We're still spoiled for choice.
  • We've got a few other shares that look good, but they can't match the top 4 here.
  • Looking for a portfolio of ideas like this one? Members of The REIT Forum get exclusive access to our model portfolio. Learn More »
Cat cowboy with a rifle on the ranch

These here are my picks for some big yielding preferred shares.

iridi/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 a comment with suggestions.

We’re bringing you the latest in inefficient markets. We're going to focus on preferred shares, and we will cover 8 of them in this article.

We start with 4 of them from the same REIT:

The comparison looks like this:

Dividend yield and investment facts for each share

The REIT Forum

Which one has the weakest floating yield on price? RITM-A.

Which one has the least upside to call value? RITM-A.

If investors assume Rithm (RITM) is going to call the shares on 8/15/2024, then they would rather have RITM-B for a significantly larger capital gain. If they assume RITM won’t call the shares, then RITM-B still wins for the much higher yield after shares begin floating.

What if RITM only calls RITM-A but doesn’t call RITM-B? In that scenario, RITM-B would probably start trading very close to $25.00. So while it wouldn’t be a call, investors would probably have the opportunity to close out their position at a similar price. It’s very unusual to see shares called at $25.00 while a very similar share trades materially below $25.00. What if it happened? Well, investors would still be getting a great yield on the shares of RITM-B.

Now what about the RITM-C and RITM-D? They take longer to float. However, RITM-C offers the biggest upside to call value. That’s pretty nice for maximizing the potential gains. On the other hand, RITM-D has the biggest floating spread, which is great for income generation after the shares begin floating.

What if you assume rates will be high in 2024, then crash to 0 in 2026? You should probably be looking at fixed-rate shares then and there are some great opportunities in the fixed-rate shares as well. However, it is worth noting that even if you assume rates falling, RITM-D’s spread of 6.223% is still pretty large. With shares trading below $22.50, investors are getting quite a few extra shares for their investment. If rates were near 0% and the investor’s yield on cost was still around 7%, that would still be pretty good.

I was going to switch over to common shares here, but that section became so large it wasn’t going to mix well with the preferred shares.

Instead, I want to highlight some more preferred shares:

The table is shown below:

Comparison of 3 shares for big dividend yields

The REIT Forum

The relative attractiveness is pretty similar now. The Price-to-buy column only spans from 93.8% to 95.8%. That’s a difference of 200 basis points, which is reasonably small. However, the market hasn’t always been so efficient.

Investment performance over the last year

The REIT Forum

You may notice that NLY-G was often the most expensive share to ride on the way in. Why is that? Because all 3 shares traded pretty close to $25.00 despite NLY-G having a materially lower floating spread. The gap between 4.172% and 4.989% is material and it warrants a difference in share prices. Today, investors could pick any of the 3 and be getting a pretty similar deal. Each is pretty good, but not great. In this environment, we can get much better discounts with other shares.

For investors willing to take on a bit more risk, I want to suggest MFA-C (MFA.PC):

Dividend yield and other important investment metrics

The REIT Forum

Shares have a substantial discount to call value and a substantial discount to our targets. The floating spread of 5.345% isn’t too bad, though it isn’t great either. However, when shares are trading near $20, it becomes much more attractive. The dividend rate is based on the $25 call value, so buying near $20 means investors are getting 25% more shares and therefore 25% more income. If short-term rates remain at the current levels, the yield on these shares (at the current price) would climb to 10.6%. That’s materially higher than the 8.24% stripped yield today, though I find that 8.24% stripped yield to be a respectable return anyway.

Following this review, my top choices among the shares we discussed are RITM-B, RITM-C, RITM-D, and MFA-C.

RITM-A is offering a materially weaker risk/reward profile. The NLY preferred shares are cheap enough to be attractive, but we’re still spoiled for choice. While they are attractive, they are clearly not quite as attractive as the other options.

The rest of the charts in this article may be self-explanatory to some investors. However, if you’d like to know more about them, you’re encouraged to see our notes for the series.

Stock Table

We will close out the rest of the article with the tables and charts we provide for readers to help them track the sector for both common shares and preferred shares.

We’re including a quick table for the common shares that will be shown in our tables:

Type of REIT or BDC

Residential Agency

Residential Hybrid

Residential Originator and Servicer

Commercial

BDC

AGNC

CIM

PMT

BXMT

MAIN

NLY

EFC

RITM

GPMT

TSLX

DX

NYMT

WMC

NEWT

ORC

MFA

RC

ARCC

ARR

MITT

GAIN

CHMI

GBDC

TWO

SLRC

IVR

ORCC

AAIC

TCPC

EARN

PFLT

OCSL

AINV / MFIC

FSK

PSEC

Let the images begin!

Residential Mortgage REIT Charts

Note: The chart for our public articles uses the book value per share from the latest earnings release. Current estimated book value per share is used in reaching our targets and trading decisions. It is available in our service, but those estimates are not included in the charts below.

Residential mortgage REIT price to book ratio chart

The REIT Forum

Residential mortgage REIT dividend yield chart

The REIT Forum

Residential mortgage REIT earnings yield chart

The REIT Forum

Commercial Mortgage REIT Charts

Commercial mortgage REIT price to book ratio chart

The REIT Forum

Commercial mortgage REIT dividend yield chart

The REIT Forum

Commercial mortgage REIT earnings yield chart

The REIT Forum

BDC Charts

BDC price to book ratio chart

The REIT Forum

BDC dividend yield chart

The REIT Forum

BDC earnings yield chart

The REIT Forum

Preferred Share Charts

Preferred share price comparison chart

The REIT Forum

Preferred share stripped yield comparison chart

The REIT Forum

Preferred share floating yield comparison chart

The REIT Forum

preferred share price comparison for higher risk shares

The REIT Forum

preferred share stripped yield comparison for higher risk shares

The REIT Forum

preferred share floating yield comparison for higher risk shares

The REIT Forum

Preferred Share Data

Beyond the charts, we’re also providing our readers with access to several other metrics for the preferred shares.

After testing out a series on preferred shares, we decided to try merging it into the series on common shares. After all, we are still talking about positions in mortgage REITs. We don’t have any desire to cover preferred shares without cumulative dividends, so any preferred shares you see in our column will have cumulative dividends. You can verify that by using Quantum Online. We’ve included the links in the table below.

To better organize the table, we needed to abbreviate column names as follows:

  • Price = Recent Share Price - Shown in Charts
  • BoF = Bond or FTF (Fixed-to-Floating)
  • S-Yield = Stripped Yield - Shown in Charts
  • Coupon = Initial Fixed-Rate Coupon
  • FYoP = Floating Yield on Price - Shown in Charts
  • NCD = Next Call Date (the soonest shares could be called)
  • Note: For all FTF issues, the floating rate would start on NCD.
  • WCC = Worst Cash to Call (lowest net cash return possible from a call)
  • QO Link = Link to Quantum Online Page

Ticker

Price

BoF

S-Yield

Coupon

FYoP

NCD

WCC

QO Link

P-Link

AGNCM

$22.03

FTF

7.89%

6.88%

8.38%

4/15/2024

$5.99

AGNCM

Prospectus

AGNCN

$24.56

FTF

7.20%

7.00%

8.31%

10/15/2022

$0.88

AGNCN

Prospectus

AGNCO

$22.50

FTF

7.29%

6.50%

8.94%

10/15/2024

$6.17

AGNCO

Prospectus

AGNCP

$21.58

FTF

7.16%

6.13%

8.98%

4/15/2025

$7.64

AGNCP

Prospectus

NLY-F

$24.42

FTF

7.23%

6.95%

8.29%

9/30/2022

$1.02

NLY-F

Prospectus

NLY-G

$22.90

FTF

7.21%

6.50%

7.93%

3/31/2023

$3.32

NLY-G

Prospectus

NLY-I

$23.85

FTF

7.19%

6.75%

8.48%

6/30/2024

$4.53

NLY-I

Prospectus

ARR-C

$22.31

7.85%

7.00%

7.85%

1/28/2025

$6.93

ARR-C

Prospectus

DX-C

$23.61

FTF

7.38%

6.90%

9.02%

4/15/2025

$6.13

DX-C

Prospectus

FBRT-E

$21.60

8.79%

7.50%

8.79%

9/17/2022

$3.73

FBRT-E

Prospectus

EFC-A

$22.01

FTF

7.75%

6.75%

9.38%

10/30/2024

$6.87

EFC-A

Prospectus

RITM-A

$23.04

FTF

8.20%

7.50%

9.60%

8/15/2024

$5.73

RITM-A

Prospectus

RITM-B

$21.79

FTF

8.24%

7.13%

9.97%

8/15/2024

$6.79

RITM-B

Prospectus

RITM-C

$20.00

FTF

8.03%

6.38%

10.01%

2/15/2025

$9.00

RITM-C

Prospectus

RITM-D

$22.35

FTF

7.89%

7.00%

10.43%

11/15/2026

$10.11

RITM-D

Prospectus

PMT-A

$24.50

FTF

8.44%

8.13%

9.15%

3/15/2024

$4.06

PMT-A

Prospectus

PMT-B

$24.81

FTF

8.21%

8.00%

9.20%

6/15/2024

$4.20

PMT-B

Prospectus

PMT-C

$20.49

8.39%

6.75%

8.39%

8/24/2026

$11.59

PMT-C

Prospectus

AIC

$24.93

Bond

6.88%

6.75%

6.88%

9/17/2022

$0.51

AIC

Prospectus

AAIN

$23.98

Bond

6.29%

6.00%

6.29%

8/1/2023

$2.52

AAIN

Prospectus

CIM-A

$23.43

8.70%

8.00%

8.70%

9/17/2022

$2.09

CIM-A

Prospectus

CIM-B

$23.25

FTF

8.77%

8.00%

9.61%

3/30/2024

$5.34

CIM-B

Prospectus

CIM-C

$21.64

FTF

9.13%

7.75%

9.10%

9/30/2025

$9.75

CIM-C

Prospectus

CIM-D

$22.36

FTF

9.12%

8.00%

9.53%

03/30/2024

$6.23

CIM-D

Prospectus

Second Batch:

Ticker

Price

BoF

S-Yield

Coupon

FYoP

NCD

WCC

QO Link

P-Link

TWO-A

$23.80

FTF

8.61%

8.13%

9.15%

04/27/2027

$10.85

TWO-A

Prospectus

TWO-B

$22.39

FTF

8.59%

7.63%

9.38%

07/27/2027

$12.14

TWO-B

Prospectus

TWO-C

$21.78

FTF

8.40%

7.25%

9.25%

1/27/2025

$7.76

TWO-C

Prospectus

MFA-B

$22.25

8.59%

7.50%

8.59%

9/17/2022

$3.17

MFA-B

Prospectus

MFA-C

$20.55

FTF

8.05%

6.50%

10.30%

3/31/2025

$8.94

MFA-C

Prospectus

GPMT-A

$22.00

FTF

8.04%

7.00%

10.12%

11/30/2026

$10.65

GPMT-A

Prospectus

CHMI-A

$22.22

9.35%

8.20%

9.35%

9/17/2022

$3.06

CHMI-A

Prospectus

CHMI-B

$22.33

FTF

9.36%

8.25%

9.76%

4/15/2024

$6.21

CHMI-B

Prospectus

IVR-B

$21.91

FTF

9.01%

7.75%

9.49%

12/27/2024

$7.96

IVR-B

Prospectus

IVR-C

$21.50

FTF

8.89%

7.50%

9.79%

9/27/2027

$13.37

IVR-C

Prospectus

NYMTM

$23.40

FTF

8.51%

7.88%

10.17%

1/15/2025

$6.53

NYMTM

Prospectus

NYMTN

$21.85

FTF

9.27%

8.00%

10.05%

10/15/2027

$13.65

NYMTN

Prospectus

NYMTL

$20.61

FTF

8.44%

6.88%

11.17%

10/15/2026

$11.70

NYMTL

Prospectus

NYMTZ

$20.12

8.80%

7.00%

8.80%

1/15/2027

$12.76

NYMTZ

Prospectus

AAIC-B

$21.50

8.26%

7.00%

8.26%

9/17/2022

$3.81

AAIC-B

Prospectus

AAIC-C

$21.03

FTF

9.98%

8.25%

10.46%

3/30/2024

$7.50

AAIC-C

Prospectus

MITT-A

$20.76

10.17%

8.25%

10.17%

9/17/2022

$4.74

MITT-A

Prospectus

MITT-B

$19.91

10.28%

8.00%

10.28%

9/17/2022

$5.58

MITT-B

Prospectus

MITT-C

$20.20

FTF

10.13%

8.00%

11.97%

9/17/2024

$9.29

MITT-C

Prospectus

ACR-C

$21.90

FTF

9.98%

8.63%

10.30%

7/30/2024

$7.42

ACR-C

Prospectus

ACR-D

$21.90

9.10%

7.88%

9.10%

5/21/2026

$10.60

ACR-D

Prospectus

Strategy

Our goal is to maximize total returns. We achieve those most effectively by including “trading” strategies. We regularly trade positions in the mortgage REIT common shares and BDCs because:

  1. Prices are inefficient.
  2. Long-term, share prices generally revolve around book value.
  3. Short-term, price-to-book ratios can deviate materially.
  4. Book value isn’t the only step in analysis, but it is the cornerstone.

We also allocate to preferred shares and equity REITs. We encourage buy-and-hold investors to consider using more preferred shares and equity REITs.

Performance

We compare our performance against 4 ETFs that investors might use for exposure to our sectors:

Chart showing the performance of the best service on Seeking Alpha compared to four ETFs for dividend investors

The REIT Forum

The 4 ETFs we use for comparison are:

Ticker

Exposure

MORT

One of the largest mortgage REIT ETFs

PFF

One of the largest preferred share ETFs

VNQ

Largest equity REIT ETF

KBWY

The high-yield equity REIT ETF. Yes, it has been dreadful.

When investors think it isn’t possible to earn solid returns in preferred shares or mortgage REITs, we politely disagree. The sector has plenty of opportunities, but investors still need to be wary of the risks. We can’t simply reach for yield and hope for the best. When it comes to common shares, we need to be even more vigilant to protect our principal by regularly watching prices and updating estimates for book value and price targets.

Ratings: Bullish on RITM-B, RITM-C, RITM-D, MFA-C

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This article was written by

Author of The REIT Forum
The #1 REIT Service For Those Targeting Strong Total Returns
You want to be on The REIT Forum because it is the #1 REIT research service on Seeking Alpha measured by returns. Period. See our Tipranks page. How did we get there? We did a better job of managing risk and discovering opportunities. We didn’t jump into trashy high-yield equity REITs with the rest of the crowd. We cover securities for trading and securities for the buy-and-hold investor. We are clear about the difference and that enabled us to perform better since inception and better in 2020.


Securities for the buy-and-hold investor generally carry much lower risk. If we enter a high-risk position, we plan to capitalize on a change in the valuation. We monitor those positions very carefully, rather than hoping everything turns out well over the next several years. That’s why we have so few losses in our investing.


We post our portfolio for you. You also get real-time alerts on every trade we place. Our reasoning for placing a trade is explained in clear English. You can even see the exact trades with the images we include from our stock accounts. We don’t offer you several different “portfolios”, instead, we show you exactly what we own, when we bought it, and how we are doing in that position. We make it simple for investors to follow our strategy.


You’ll find several reports on The REIT Forum that don’t get posted to the public side of Seeking Alpha. Many of our public reports are dramatically reduced versions of subscriber articles. If you enjoy our public articles, you’ll love the content we keep for subscribers.


Disclosure: I/we have a beneficial long position in the shares of AGNCO, CIM-A, ARR-C, DX-C, RITM-D, AGNCP, MFA-C, NYMTZ, NYMTL, MFA-B, AGNCM, PMT-C, RITM, SLRC, AAIC, MFA, GPMT, RC 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.

Additional disclosure: 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.

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