Updated on March 4th, 2023 by Samuel Smith
Investors looking to generate higher income levels from their investment portfolios should look at Real Estate Investment Trusts or REITs. These are companies that own real estate properties and lease them to tenants or invest in real estate backed loans, both of which generate a steady stream of income.
The bulk of their income is then passed on to shareholders through dividends. You can see all 206 REITs here.
You can download our full list of REITs, along with important metrics such as dividend yields and market capitalizations, by clicking on the link below:
The beauty of REITs for income investors is that they are required to distribute 90% of their taxable income to shareholders annually in the form of dividends. In return, REITs typically do not pay corporate taxes.
As a result, many of the 200+ REITs we track offer high dividend yields of 5%+.
But not all high-yielding stocks are automatic buys. Investors should carefully assess the fundamentals to ensure that high yields are sustainable.
Note that while the securities in this article have very high yields, a high yield alone does not make for a solid investment. Dividend safety, valuation, management, balance sheet health, and growth are also very important factors.
We urge investors to use the analysis below as informative but to do significant due diligence before buying into any security – especially high-yield securities. Many (but not all) high-yield securities have a significant risk of a dividend reduction and/or deteriorating business results.
Table of Contents
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- High-Yield REIT No. 10: Chimera Inv. Corp. (CIM)
- High-Yield REIT No. 9: Two Harbors Investment Corp. (TWO)
- High-Yield REIT No. 8: MFA Financial Inc. (MFA)
- High-Yield REIT No. 7: Cherry Hill Mortgage Investment Corporation (CHMI)
- High-Yield REIT No. 6: Western Asset Mortgage Capital Corp (WMC)
- High-Yield REIT No. 5: Annaly Capital Management (NLY)
- High-Yield REIT No. 4: Orchid Island Capital Inc. (ORC)
- High-Yield REIT No. 3: Ready Capital Corp (RC)
- High-Yield REIT No. 2: ARMOUR Residential REIT (ARR)
- High-Yield REIT No. 1: Invesco Mortgage Capital Inc. (IVR)
High-Yield REIT No. 10: Chimera Inv. Corp. (CIM)
- Dividend Yield: 14.5%
Chimera Investment Corporation is a real estate investment trust (REIT) that is a specialty finance company. The company’s primary business is in investing through subsidiaries in a diversified portfolio of mortgage assets, including residential mortgage loans, Non-Agency RMBS, Agency CMBS, and other real estate related securities.
Chimera’s income is predominantly obtained by the difference between the company’s income on its assets and financing and hedging costs. The company funds the purchase of assets through several funding sources: asset securitization, repurchase agreements (repo), warehouse lines, and equity capital.
Source: Investor Presentation
Chimera announced its financial results for the fourth quarter of fiscal 2022 on February 15. However, its core earnings-per-share decreased from $0.27 to $0.11 due to wider credit spreads and rising interest rates. The company is currently facing significant challenges due to the surge in inflation and the Federal Reserve’s policy shift towards raising interest rates aggressively to curb inflation. Chimera is particularly affected by the unexpected increase in interest rates, which puts great pressure on its margins without allowing it to hedge its rates.
Click here to download our most recent Sure Analysis report on Chimera Investment Corporation (CIM) (preview of page 1 of 3 shown below):
High-Yield REIT No. 9: Two Harbors Investment Corp. (TWO)
- Dividend Yield: 14.7%
Two Harbors Investment Corp. is a residential mortgage real estate investment trust (mREIT). As such, it focuses on residential mortgage–backed securities (RMBS), residential mortgage loans, mortgage servicing rights, and commercial real estate.
Source: Investor Presentation
The trust derives nearly all of its revenue in the form of interest through available–for–sale securities.
Two Harbors released its financial results for the quarter ended December 31, 2022, on February 8th, 2023. The company reported a book value of $17.72 per common share and declared a fourth-quarter common stock dividend of $0.60 per share, which represents an 11.6% quarterly economic return on book value.
Two Harbors also announced that it generated Comprehensive Income of $160.2 million, or $1.85 per weighted average basic common share. Additionally, the company reported Earnings Available for Distribution (EAD) of $22.2 million, or $0.26 per weighted average basic common share. It also generated Income Excluding Market-Driven Value Changes of $0.73 per weighted average basic common share.
Click here to download our most recent Sure Analysis report on Two Harbors (TWO) (preview of page 1 of 3 shown below).
High-Yield REIT No. 8: MFA Financial Inc. (MFA)
- Dividend Yield: 14.8%
MFA Financial, Inc. primarily invests in various residential mortgage assets, such as non-agency mortgage-backed securities (MBS), agency MBS, and credit risk transfer securities. Additionally, it invests in residential whole loans, which includes purchased performing loans, purchased credit deteriorated loans, and non-performing loans, as well as mortgage servicing rights related assets. MFA Financial, Inc. was established in 1997 and is based in New York, New York.
On February 23rd, 2023, MFA Financial reported its Q4 results. In the fourth quarter of 2022, distributable EPS reached $0.48, surpassing the consensus estimate of $0.30, and up from $0.28 in the previous quarter ending September 30th, 2022. Net interest income for the quarter was $55.65 million, a decline from $70.15 million in the same quarter of the previous year. Interest expenses, on the other hand, surged by 144% year-over-year to $87.23 million. The allowance for credit losses amounted to $35.31 million, down from $39.45 million in Q4 2021.
The company’s total residential whole loans were $1.79 billion compared to $2.61 billion in the same quarter of the previous year. Its investments in such loans totaled $7.5 billion, with $6.3 billion being Purchased Performing Loans, $448.9 million being Purchased Credit Deteriorated Loans, and $796.1 million being Purchased Non-performing Loans. In the quarter, the company recognized $125 million of interest income on residential whole loans, representing a yield of 5.04%. During the quarter, the company sold 83 properties from its REO portfolio, generating $28.8 million of aggregate proceeds and $7.4 million of gains.
Click here to download our most recent Sure Analysis report on MFA Financial Inc. (MFA) (preview of page 1 of 3 shown below):
High-Yield REIT No. 7: Cherry Hill Mortgage Investment Corporation (CHMI)
- Dividend Yield: 15.0%
Cherry Hill Mortgage Investment Corporation is a residential real estate finance company that acquires, invests in, and manages residential mortgage assets in the United States. The company operates through three segments: Investments in RMBS (residential mortgage-backed securities), Investments in Servicing Related Assets, and All Other. Its portfolio consists of servicing related assets and RMBS. The company was established in 2012 and is headquartered in Farmingdale, New Jersey.
On November 2nd, 2022, Cherry Hill reported its Q3 results. The company reported GAAP net income applicable to common stockholders of $38.3 million, or $1.90 per share. Additionally, earnings available for distribution (“EAD”) attributable to common stockholders amounted to $5.1 million, or $0.26 per share. The common book value per share was $6.05 as of September 30, 2022. The regular common dividend of $0.27 per share was declared, and the annualized common dividend yield at market close was 19.5% as of November 1, 2022. Aggregate portfolio leverage was 4.2x as of September 30, 2022. The company had unrestricted cash of $42.7 million as of the same date.
Source: Investor Presentation
High-Yield REIT No. 6: Western Asset Mortgage Capital Corp (WMC)
- Dividend Yield: 15.2%
Western Asset Mortgage Capital Corporation is a real estate investment trust that focuses on investing in, acquiring, and managing a portfolio of assets related to residential real estate investments. Its investments include non-qualified mortgage loans, non-agency residential mortgage-backed securities (RMBS), and other related investments. Western Asset Mortgage Capital Corporation was established in 2009 and has its headquarters in Salt Lake City, Utah.
Source: Investor Presentation
On March 2nd, 2023, Western Asset Mortgage Capital Corp reported results for the fourth quarter of fiscal 2022. The occupancy rate fell sequentially from 94.3% to 90.7% and normalized funds from operations (FFO) per share dipped -10% over the prior year’s quarter, from $1.24 to $1.11. Due to some asset sales and the expiration of some leases, funds from operations per share have decreased -19% in total in the last two years. Given higher-than-expected asset sales, we have lowered our annual forecast from $4.90 to $4.70. We also remain concerned over the excessive debt load of the trust.
High-Yield REIT No. 5: Annaly Capital Management (NLY)
- Dividend Yield: 17.3%
Annaly Capital Management, Inc., a diversified capital manager, invests in and finances residential and commercial assets. The trust invests in various types of agency mortgage–backed securities, non–agency residential mortgage assets, and residential mortgage loans.
It also originates and invests in commercial mortgage loans, securities, and other commercial real estate investments. Annaly provides financing to private equity–backed middle market businesses and operates as a broker–dealer.
Source: Investor Presentation
NLY reported its financial results for the quarter and year ended December 31, 2022 on February 8th, 2023. The company experienced a GAAP net loss of $1.96 per average common share for the quarter, but a gain of $3.93 per average common share for the full year 2022. Additionally, earnings available for distribution were $0.89 per average common share for the quarter and $4.23 per average common share for the full year 2022. For the fourth quarter, the company generated an economic return of 8.7%, but experienced an economic loss of 23.7% for the full year 2022. The book value per common share was $20.79. GAAP leverage increased to 6.0x from 5.8x in the prior quarter, while economic leverage decreased to 6.3x from 7.1x in the prior quarter. The company declared a fourth-quarter common stock cash dividend of $0.88 per share.
Click here to download our most recent Sure Analysis report on Annally Capital Management (NLY)(preview of page 1 of 3 shown below):
High-Yield REIT No. 4: Orchid Island Capital Inc (ORC)
- Dividend Yield: 17.5%
Orchid Island Capital, Inc. is a Real Estate Investment Trust, or REIT, operating in the mortgage industry. Mortgage REITs differ from most other REITs. For example, traditional REITs typically own a portfolio of physical real estate, which they lease to tenants to collect rental income. Mortgage REITs are purely financial entities, and Orchid Island does not own any physical properties. Instead, it is an externally managed REIT (by Bimini Advisors LLC) that invests in residential mortgage-backed securities (RMBS), either pass-through or structured agency RMBSs, which are financial instruments that collect cash flow based on residential loans such as mortgages, including subprime, and home-equity loans.
Source: Investor Presentation
On February 23rd, 2023, Orchid Island Capital reported Q4 results. In the fourth quarter, the company reported an EPS of $0.95, a significant improvement from the -$0.84 reported in Q4 2021. However, net interest income declined by 94.3% year-over-year to $2.4 million, and by 83.1% sequentially. As of December 31, 2022, the book value per share was $11.93, up from $11.42 at September 30, 2022, and $4.34 at December 31, 2021. The firm reduced its Agency RMBS portfolio throughout 2022 to $3.5 billion as of December 31, 2022. Interest income on the portfolio in the fourth quarter was down approximately $3.7 million sequentially. Net realized and unrealized gains amounted to $38.4 million, or $1.04 per share, on RMBS and derivative instruments, including net interest income on interest rate swaps.
Click here to download our most recent Sure Analysis report on Orchid Island Capital Inc. (ORC) (preview of page 1 of 3 shown below).
High-Yield REIT No. 3: Ready Capital Corp (RC)
- Dividend Yield: 15.9%
Ready Capital Corporation is a financial company that acquires, originates, manages, services, and finances various types of loans and real estate-related investments. Its portfolio includes small to medium balance commercial (SBC) loans, small business administration (SBA) loans, residential mortgage loans, and mortgage-backed securities collateralized primarily by SBC loans.
The company operates through three segments: SBC Lending and Acquisitions, Small Business Lending, and Residential Mortgage Banking. The SBC Lending and Acquisitions segment originates SBC loans using various loan origination channels. These loans are secured by stabilized or transitional investor properties. The Small Business Lending segment acquires, originates, and services owner-occupied loans guaranteed by the SBA under its SBA Section 7(a) Program. The Residential Mortgage Banking segment originates residential mortgage loans.
Ready Capital Corporation was founded in 2007 as Sutherland Asset Management Corporation and changed its name to Ready Capital Corporation in September 2018. The company is headquartered in New York, New York.
Source: Investor Presentation
On February 27th, 2023, Ready Capital reported Q4 results. The company’s loan portfolio amounted to $1.4 billion, including $49.9 million of new originations and amendments in the quarter. At origination, the loans had a weighted average loan-to-value of 63.0% and a weighted average yield of 11.6%. The payoff pace remained stable, with an average monthly run-rate of $39.3 million. Total revenue for the quarter was $21.1 million, but the company reported a GAAP net loss of $153.0 million, or ($1.15) per diluted common share. This included a goodwill impairment of $137.0 million or ($1.03) per diluted common share, and an increased provision for credit losses of $21.5 million or ($0.16) per diluted common share. The change in the allowance for credit losses was primarily due to heightened market volatility and an increase in loans expected to foreclose.
Distributable earnings prior to realized loss on investments were $12.3 million, or $0.09 per diluted common share. Distributable earnings were impacted by increased interest receivable reserves of $3.3 million, or ($0.02) per diluted common share, resulting from interest receivable related to non-accrual loans being deemed not collectible. Additionally, the company repurchased approximately $5.0 million of common stock at an average price of $3.86.
High-Yield REIT No. 2: ARMOUR Residential REIT (ARR)
- Dividend Yield: 17.9%
ARMOUR is a mortgage REIT that invests primarily in residential mortgage–backed securities that are guaranteed or issued by a United States government entity, including Fannie Mae, Freddie Mac and Ginnie Mae.
Source: Investor Presentation
ARMOUR released its Q4 results on February 15th, 2023. The company generated comprehensive income available to common stockholders of $39.5 million or $0.27 per common share. Its net interest income of $11.6 million and net interest margin of 2.59% were up 38 basis points from the previous quarter. Distributable Earnings available to common stockholders were $38.8 million, representing $0.27 per common share.
In addition, the company raised $174.2 million of capital through an at-the-market offering program by issuing 30,721,405 shares of common stock at $5.67 net proceeds per share after fees and expenses. It also repurchased 449,700 shares of common stock pursuant to existing authorization at an average cost of $5.01 per share.
Click here to download our most recent Sure Analysis report on ARMOUR Residential REIT (ARR) (preview of page 1 of 3 shown below):
High-Yield REIT No. 1: Invesco Mortgage Capital Inc. (IVR)
- Dividend Yield: 23.2%
Invesco Mortgage Capital Inc. is a company that primarily focuses on investing in, financing, and managing various mortgage-related assets. Its portfolio includes residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) that are both guaranteed and not guaranteed by a U.S. government agency or federally chartered corporation.
The company also invests in credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises, residential and commercial mortgage loans, and other real estate-related financing arrangements. Invesco Mortgage Capital Inc. was incorporated in 2008 and is headquartered in Atlanta, Georgia.
Source: Investor Presentation
Invesco released its Q4 results on February 21st, 2023. The company reported Q4 Non-GAAP EPS of $1.46, which beat estimates by $0.47. However, its revenue of $41.5M was down 9.9% YoY and missed estimates by $12.88M. The company maintained its common stock dividend at $0.65 per common share, which was the same as Q3 2022. Book value per common share was $12.79 compared to $12.80 in Q3 2022. The company’s economic return improved to 5.0% in Q4 2022 compared to a negative return of 16.8% in Q3 2022.
Final Thoughts
REITs have significant appeal for income investors due to their high yields. These ten extremely high-yielding REITs are especially attractive on the surface, although investors should be aware that abnormally high yields are often accompanied by elevated risks.
At Sure Dividend, we often advocate for investing in companies with a high probability of increasing their dividends each and every year.
If that strategy appeals to you, it may be useful to browse through the following databases of dividend growth stocks:
- The Dividend Aristocrats List: S&P 500 stocks with 25+ years of dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 45 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.