New Residential Investment Corp (NYSE: NRZ) stock has had a decent year so far, up over 9% year to date.
But the thing about this real estate investment trust (REIT) is not its stock performance — which is nice — but its massive dividend yield, which currently sits at 11.6%.
That isn’t a typo. 11.6%.
What Makes NRZ Stock Special?
REITs operate a little differently than most typical companies. Since they are considered trusts, investors are viewed more as owners than shareholders. And REITs must pay out 90% of their taxable income in the form of dividends to its “owners.”
This is why quality REITs are very good investments for solid income when the economy is healthy.
Recently, we’ve seen some sectors of REITs get hammered. For example, REITs that were focused on shopping malls have been hammered as online shopping has taken its toll on anchor stores in big malls and smaller malls have suffered as people are no longer making the trip to the store, which hurts retailers and makes it difficult for the REITs that own their brick and mortar properties.
On the other hand, REITs that lease buildings for server farms and cloud storage are doing very well as this trend continues to expand.
The point is, you have to make sure you’re picking REITs that are in the right sectors. Not all REITs are created equally and it’s important to be very particular when you choose one.
In the case of NRZ, it specializes in mortgage servicing rights (MSR). Basically, the mortgage lender farms out the management of the mortgage to a company that collects the mortgage, escrow, etc and then collects a fee for servicing the mortgage.