A real estate investment trust (REIT) is a company that owns, operates or finances real estate that generates income through mortgages, leases, rents and interest payments. Following a structure similar to mutual funds, REITs pool the capital of many different investors. This makes it possible for investors to earn dividends from REITs without having to actually buy or manage any properties on their own. There are many REITs with high dividend payouts, especially when compared to the yields offered on stocks of companies.
REITs offer investors the chance to invest in the real estate market in a more affordable way than purchasing properties themselves. This and their dividend yields make them attractive. Yet, unless you’re a hard-core REIT investor, you may not be familiar with some of these lesser-known REITs with impressive dividend yields.
|CIM||Chimera Investment Corporation||$4.88|
|MPW||Medical Properties Trust||$7.64|
|NYMT||New York Mortgage Trust||$9.72|
Chimera Investment Corporation (CIM)
Chimera Investment Corporation (NYSE:CIM) is a REIT with a current yield of 18.9%. The real estate investment trust holds mostly mortgage assets. Its portfolio includes government-backed residential mortgages and commercial mortgage-backed securities. The company generates the majority of its income from interest payments on those real estate assets.
Chimera has a wide range of funding sources, including asset securitization, repurchase agreements and convertible debt. This enables the company to be flexible and respond quickly when market opportunities present themselves.
CIM stock has declined 50% in the past year, due mostly to a downturn in the real estate market caused by higher interest rates charged on mortgages. However, the quarterly dividend payment of 23 cents a share makes Chimera Investment attractive for those willing to wait for a rebound.
Medical Properties Trust (MPW)
While Medical Properties Trust’s (NYSE:MPW) yield isn’t quite as high as CIM’s, it’s also one of the REITs with high dividend payouts. The second-largest owner of hospitals in the world (outside of governments) pays a 29-cent quarterly dividend for a 13.8% yield.
Medical Properties Trust owns 444 medical facilities, including general acute care, inpatient rehabilitation and long-term acute care hospitals, as well as behavioral health facilities and urgent care facilities. It operates on a lease model that requires its hospital tenants to pay for various costs such as maintenance, taxes and insurance. This arrangement helps keep Medical Properties Trust’s expenses low. The company continues to expand, spending billions on acquisitions in recent years.
While MPW is down 54% over the past year, it has increased its dividend payment for eight consecutive years, making it a good bet for income investors.
New York Mortgage Trust (NYMT)
New York Mortgage Trust (NASDAQ:NYMT) is hard to ignore with a dividend yield of 16.5%. This REIT is focused on acquiring, investing in, financing, and managing residential housing properties, primarily in and around New York City, arguably the world’s most competitive and lucrative property market. The company’s investment portfolio is diverse and includes multi-family homes, distressed residential assets and second mortgages.
New York Mortgage Trust generates interest income from its large portfolio of assets, mostly mortgages. The delinquent mortgages it owns have proven to be problematic in the midst of the current real estate downturn, but it also tries to generate capital from the distressed assets it owns.
NYMT is down 20% over the past year, but the current storm clouds should eventually pass. In the meantime, investors can comfort themselves with a quarterly dividend of 40 cents a share.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.