REITs, or real estate investment trusts, are all the rage right now. REIT investments yield big dividends and reliable revenue streams, since by law these types of stocks must deliver 90% of their taxable income to shareholders.
So how do you go shopping for a REIT? Well, yield is important to most investors, so they tend to gravitate toward big dividends — well in excess of 5%. And since a lot of investors are reluctant to put too much cash into this market, many are looking for cheap picks, too.
So to help you on that hunt for yield, I’ve compiled a list of five real estate investment trusts with big yields and cheap stock prices. All are less than $10, and some yield as high as 17%.
Here’s the list:
Armour Residential REIT
Market Cap: $1.2 billion
Dividend Yield: 17%
June 11 Open: $7.05
Armour Residential REIT (NYSE:ARR) is one of those mortgage paper REITs that deals not in property but in the financing of property. Specifically, Armour invests primarily in adjustable-rate and fixed-rate mortgage-backed securities issued with government support via Fannie Mae or Freddie Mac.
Its yield is a staggering 17% based on monthly dividends — that’s right, monthly — of 10 cents per share. This dividend is, of course, subject to change and was just reduced from 11 cents back in March. But dividends have been paid in some form since 2010 … so while there’s risk, the shocking yield is just too much to ignore for some investors. Shares of ARR are flat year-to-date.
Market Cap: $530 million
Dividend Yield: 11.5%
June 11 Open: $9.78
Dynex Capital (NYSE:DX) is a risky REIT focused on leveraging up select mortgage-backed securities. Its specialty is short-duration agency residential and commercial assets in the U.S. — which sounds crazy, but it is designed simply to exploit interest rates and generate massive yields for dividend investors.
The company just shelled out 28 cents in April for its quarterly dividend — good for an annualized dividend yield of 11.5%! And what’s more, unlike some of the other picks on this list, Dynex Capital is moving its distributions in the right direction. The quarterly yield was just 27 cents last October before getting bumped up a penny in 2012. The icing on the cake is that DX shares have outperformed the market, too, with a 7% gain since New Year’s.
Market Cap: $750 million
Dividend Yield: 11%
June 11 Open: $9.90
Crexus Investment (NYSE:CXS) is a real estate investment trust that is like Armour Residential (NYSE:ARR), but instead focuses on commercial mortgage loans and commercial mortgage-backed securities in addition to so called “agency” residential mortgages from Fannie and Freddie.
Like Armour, the dividend has just been reduced — from 35 cents in January to a quarterly payout of 27 cents in April — and be warned: Back in January 2011, the payout was only 22 cents for the quarter. But even if payouts fall back to 22 cents, the annualized yield still would be a juicy 9% at current valuations. This REIT is off about 5% since January.
Ashford Hospitality Trust
Market Cap: $560 million
Dividend Yield: 5.3%
June 11 Open: $8.59
Ashford Hospitality Trust (NYSE:AHT) is a real estate investment trust focused on the hospitality industry, owning and investing in hotel or condo properties. The company is small, with a roughly $560 million market cap as of this writing, and only trades about 500,000 shares daily.
However, the 11-cent quarterly dividend is good for a nice 5.3% dividend yield. What’s more, the stock has outperformed the market with a gain of almost 4% since Jan. 1, and the dividend was just bumped up from 10 cents to 11 cents this spring. Ashford has not announced its next dividend, but you should expect it soon considering the previous dividend announcement was declared roughly three months ago.
Inland Real Estate
Market Cap: $750 million
Dividend Yield: 6.8%
June 11 Open: $8.65
Inland Real Estate (NYSE:IRC) owns and operates neighborhood and single-tenant retail centers and is the best performer on this list on a per-share basis, tacking on an impressive 10% since Jan. 1 to trounce a sideways market. But this is a dividend-focused stock list, so let’s talk yield.
IRC has paid a dividend since 2004 and currently is churning out a consistent 4.75-cent yield per month. That’s right: This is another company with a 30-day dividend cycle instead of a 90-day dividend cycle. At 57 cents annually, your yield is a nice 6.8% in this pick. Just make sure to use a limit order if you’re shopping for Inland Real Estate. Only about 200,000 to 300,000 shares trade on a given day, and you don’t want to get overcharged with a market order if you buy at the wrong time.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at [email protected]??.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves did not own a position in any of the stocks named here.