5/7 Close: $9.47
Market Cap: $515 million
Another REIT that deals in mortgage paper, Dynex Capital (NYSE:DX) throws off a great yield — even if its underlying business gives investors pause. The 11.8% yield based on a 28-cent quarterly payout, however, should make investors mighty pleased. The other thing to note is that unlike some other mortgage REITs, Dynex has no shortage of profits to share with stockholders — earning $1.41 a share in fiscal 2010 and earning $1.03 in fiscal 2011. Revenue has been on the rise for 12 straight quarters, too.
The downside? Well, math majors will note that 28 cents a quarter for its current dividend totals $1.12 a year — which is more than its total profits for 2011 and thus unsustainable. But if revenue keeps moving up and profits improve, there is no cause for alarm. Even a small dividend cut will still mean your investment has a decent payback via distributions — since as an REIT, a significant portion of profits must be returned to shareholders no matter what. Just remember that you’re dealing in a real estate stock during a horrible real estate market. That comes with very obvious (and possibly very painful) risks.