Updated on November 6th, 2023 by Bob Ciura
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 200+ 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: KKR Real Estate Finance Trust (KREF)
- High-Yield REIT No. 9: New York Mortgage Trust (NYMT)
- High-Yield REIT No. 8: Sachem Capital (SACH)
- High-Yield REIT No. 7: Annally Capital Management (NLY)
- High-Yield REIT No. 6: Ellington Residential Mortgage REIT (EARN)
- High-Yield REIT No. 5: AGNC Investment Corp. (AGNC)
- High-Yield REIT No. 4: Office Properties Income Trust (OPI)
- High-Yield REIT No. 3: Global Net Lease (GNL)
- High-Yield REIT No. 2: Orchid Island Capital (ORC)
- High-Yield REIT No. 1: ARMOUR Residential REIT (ARR)
High-Yield REIT No. 10: KKR Real Estate Finance Trust (KREF)
- Dividend Yield: 14.8%
KKR Real Estate Finance Trust is a real estate finance company that engages primarily in originating and acquiring transitional senior loans secured by institutional-quality commercial real estate (“CRE”) properties. These senior loans are originally owned and operated by experienced and well-capitalized sponsors located in liquid markets with strong underlying fundamentals.
Source: Investor Presentation
Since its initial public offering (IPO), KREF has experienced rapid growth in its loan portfolio by borrowing at lower rates and issuing shares with a lower cost of equity compared to the spreads it earns as net interest income. The company has leveraged its manager’s (KRR) access to low-cost financing in a favorable low-rate environment.
KREF’s term loan financing facilities provide KRR with matched-term financing on a non-mark-to-market and non-recourse basis, strengthening the company’s liability structure and enhancing its risk management capabilities and liquidity position.
KREF generates around $185 million in net interest income and is headquartered in New York, New York.
Click here to download our most recent Sure Analysis report on KKR Real Estate Finance Trust Inc. (KREF) (preview of page 1 of 3 shown below):
High-Yield REIT No. 9: New York Mortgage Trust (NYMT)
- Dividend Yield: 15.0%
New York Mortgage Trust acquires, invests in, finances, and manages mortgage-related assets and other financial assets. The trust doesn’t own physical real estate, but rather seeks to manage a portfolio of investments that are real estate related. New York Mortgage Trust derives revenue from net interest income and net realized capital gains from its investment portfolio.
The trust invests in residential mortgage loans, multi-family CMBS, preferred equity, and joint venture equity.
NYMT posted second quarter earnings on August 2nd, 2023, and results were quite weak. Adjusted earnings-per-share came to a loss of 38 cents, which missed estimates by 51 cents. Revenue was more than double the prior year quarter at $40.7 million, which beat estimates by $16.2 million.
The company’s yield on average earning assets was 6.07%, which created a net interest spread of just 0.48%. This has caused a massive decline in the company’s profitability, and we believe the road ahead for NYMT’s interest spread is bleak given the continued inversion of the yield curve.
Click here to download our most recent Sure Analysis report on NYMT (preview of page 1 of 3 shown below):
High-Yield REIT No. 8: Sachem Capital (SACH)
- Dividend Yield: 15.1%
Sachem Capital Corp specializes in originating, underwriting, funding, servicing, and managing a portfolio of short-term (i.e., three years or less) loans secured by first mortgage liens on real property located primarily in Connecticut.
Each of Sachem’s loans is personally guaranteed by the principal(s) of the borrower, which is typically collaterally secured by a pledge of the guarantor’s interest in the borrower. The company generates around $30 million in total revenues.
On August 14th, 2023, Sachem Capital Corp. announced its Q2 results for the period ending June 30th, 2023. Total revenues for the quarter came in at $16.5 million, up 31.2% compared to Q2-2022. The growth in revenue was primarily driven by an increase in lending operations and higher rates that Sachem was able to charge borrowers due to rising interest rates. Net income was approximately $4.8 million, roughly 12% higher compared to the prior-year period.
Click here to download our most recent Sure Analysis report on Sachem Capital (SACH) (preview of page 1 of 3 shown below):
High-Yield REIT No. 7: Annally Capital Management (NLY)
- Dividend Yield: 15.1%
Annaly Capital Management 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.
On October 25, 2023, Annaly released its financial results for the third quarter of 2023. The report highlighted a GAAP net loss of ($1.21) per average common share for the quarter. Additionally, earnings available for distribution (“EAD”) were reported at $0.66 per average common share for the same period.
The quarter was marked by a sharp rise in interest rates, driven partially by strong economic data and changing perceptions around U.S. government debt. This resulted in a negative 8.8% economic return for the quarter and a reported leverage of 6.4x.
Click here to download our most recent Sure Analysis report on NLY (preview of page 1 of 3 shown below):
High-Yield REIT No. 6: Ellington Residential Mortgage REIT (EARN)
- Dividend Yield: 16.5%
Ellington Residential Mortgage REIT acquires, invests in, and manages residential mortgage and real estate related assets. Ellington focuses primarily on residential mortgage-backed securities, specifically those backed by a U.S. Government agency or U.S. government–sponsored enterprise.
Agency MBS are created and backed by government agencies or enterprises, while non-agency MBS are not guaranteed by the government.
Source: Investor Presentation
On August 10th, 2023, Ellington Residential reported its second quarter results for the period ending June 30th, 2023. The company generated net income of $1.2 million, or $0.09 per share. Ellington achieved adjusted distributable earnings of $2.4 million in the quarter, leading to adjusted earnings of $0.17 per share, which does not cover the dividend paid in the period.
Click here to download our most recent Sure Analysis report on EARN (preview of page 1 of 3 shown below):
High-Yield REIT No. 5: AGNC Investment Corp. (AGNC)
- Dividend Yield: 17.2%
American Capital Agency Corp is a mortgage real estate investment trust that invests primarily in agency mortgage–backed securities (or MBS) on a leveraged basis.
The firm’s asset portfolio is comprised of residential mortgage pass–through securities, collateralized mortgage obligations (or CMO), and non–agency MBS. Many of these are guaranteed by government–sponsored enterprises.
Source: Investor Presentation
AGNC reported its Q2 2023 results on July 24th, 2023, reporting a non-GAAP EPS of $0.67, surpassing expectations by $0.04. As of June 30, 2023, the tangible net book value per common share was $9.39. Their investment portfolio amounted to $58.0 billion, consisting of $46.7 billion in Agency MBS, $10.2 billion net TBA mortgage position, and $1.1 billion in credit risk transfer (“CRT”) and non-Agency securities.
The company’s leverage, based on tangible net book value “at risk,” was 7.2x as of June 30, 2023, and the average leverage for the quarter was also 7.2x. Cash and unencumbered Agency MBS totaled $4.3 billion as of June 30, 2023.
Click here to download our most recent Sure Analysis report on AGNC Investment Corp (AGNC) (preview of page 1 of 3 shown below):
High-Yield REIT No. 4: Office Properties Income Trust (OPI)
- Dividend Yield: 18.2%
Office Properties Income Trust is a REIT that currently owns 157 buildings, which are primarily leased to single tenants with high credit quality. The REIT’s portfolio currently has a 90.5% occupancy rate.
In late October, OPI reported (10/30/2023) financial results for the third quarter of fiscal 2023. The occupancy rate dipped sequentially from 90.6% to 89.8% and normalized funds from operations (FFO) per share fell -8%, from $1.11 to $1.02.
More than 90% of the debt of OPI is at fixed rates but we expect interest expense to increase this year due to high interest rates. Notably, interest expense has consumed 94% of operating income in the last 12 months.
Click here to download our most recent Sure Analysis report on OPI (preview of page 1 of 3 shown below):
High-Yield REIT No. 3: Global Net Lease (GNL)
- Dividend Yield: 18.3%
Global Net Lease invests in commercial properties in the U.S. and Europe with an emphasis on sale-leaseback transactions. The trust owns well in excess of 300 properties, of which office is the largest sector, followed by industrial and retail. Global Net Lease is a $1.1 billion market capitalization business.
On August 3rd, 2023, Global Net Lease released its Q2 results. The company announced a merger agreement with The Necessity Retail REIT, Inc., expected to close in September 2023, which aims to create the third largest publicly traded net lease REIT with a global presence, providing 9% accretion to annualized AFFO per share in the first quarter post-closing. This merger is projected to generate $75 million in annual cost savings within a year of closing.
Q2 2023 revenue amounted to $95.8 million, slightly higher than Q2 2022’s $95.2 million. However, net loss attributable to common stockholders was $31.4 million, a decrease from $5.8 million in Q2 2022. Net operating income (NOI) for Q2 2023 was $86.8 million, a minor decrease from Q2 2022’s $87.4 million.
Click here to download our most recent Sure Analysis report on Global Net Lease (GNL) (preview of page 1 of 3 shown below):
High-Yield REIT No. 2: Orchid Island Capital Inc (ORC)
- Dividend Yield: 24.8%
Orchid Island Capital, Inc. is an mortgage REIT that is externally managed by Bimini Advisors LLC and focuses on investing in residential mortgage-backed securities (RMBS), including pass-through and structured agency RMBSs. These financial instruments generate cash flow based on residential loans such as mortgages, subprime, and home-equity loans.
Source: Investor Presentation
On October 27, 2023, Orchid Island Capital released its financial results for the third quarter. The company reported a net loss of $80.1 million for the quarter ending on September 30, 2023, which is a slight improvement compared to the net loss of $84.5 million for the same period in 20222.
Orchid’s Agency Residential Mortgage-Backed Securities (RMBS) portfolio increased from $4.4 billion at the end of June 2023 to $4.5 billion at the end of September 2023. The interest income on this portfolio rose by approximately $10.2 million from Q2 2023. In terms of yield, the average Agency RMBS yield went up from 3.81% in Q2 2023 to 4.51% in Q3 2023.
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. 1: ARMOUR Residential REIT (ARR)
- Dividend Yield: 25.6%
As an mREIT, ARMOUR Residential invests in residential mortgage-backed securities that include U.S. Government-sponsored entities (GSE) such as Fannie Mae and Freddie Mac. It also includes Ginnie Mae, the Government National Mortgage Administration’s issued or guaranteed securities backed by fixed-rate, hybrid adjustable-rate, and adjustable-rate home loans.
Unsecured notes and bonds issued by the GSE and the US Treasury, money market instruments, and non-GSE or government agency-backed securities are examples of other types of investments.
Source: Investor Presentation
On October 25, 2023, ARR announced its Q3 2023 results and financial position as of September 30, 2023. Following a one-for-five reverse stock split completed on September 29, 2023, the company reported a loss of $(182.2) million or $(3.92) per common share.
Net interest income stood at $3.6 million, and distributable earnings available to common stockholders were $50.2 million, equating to $1.08 per common share. The asset yield was 4.65%, and after deducting the net cost of funds of 2.92%, the net interest margin was 1.73%.
Click here to download our most recent Sure Analysis report on ARMOUR Residential REIT Inc (ARR) (preview of page 1 of 3 shown below):
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.
If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:
High-Yield Individual Security Research
- 20 Highest-Yielding BDCs
- 20 Highest-Yielding MLPs
- 20 Highest Yielding Dividend Kings
- 9 Highest Yielding Royalty Trusts
Other Sure Dividend Resources