Income investors should be well familiar with real estate investment trusts or REITs. For context, REITs are structured differently from public corporations, don’t have to pay the typical corporate income taxes, and must pay shareholders 90% of their taxable income. With those kinds of numbers, it's no surprise that REITs offer some of the highest yields on the market.
Yet, not every stock that says “real estate investment trust” should be trusted. Some REITs are better than others. Some go to zero, leaving investors with no choice but to sell their shares at pennies to the dollar. That’s why finding ones that offer stability, attractive returns, and high yields should be prioritized.
So, I’ll look for the highest-yielding, buy-rated REITs today.
How I Came Up With The Following Stock
This analysis is a four-step process. First step: I went to Barchart Watchlist and pulled up my REIT watchlist.
From there, I clicked “Screen” and was brought to the Stock Screener page. After that, I added these easy-to-remember filters:
- Annual Dividend Yield: Left blank so it appears on the results page.
- Number of Analysts: 8 or more. I want consensus recommendations to be actual consensus, not a solitary analyst firm giving strong buy recommendations. Therefore, I set the number of analysts converting the stock to a minimum of 8.
- Current Analyst Rating: 3.5 (Moderate Buy) to 5 (Strong Buy). I want results that have primarily green checkmarks across analysts’ scoreboards, so I set the screener to look for only those with buy ratings.
After running the screen, I got 70 results. Now for the hard part: deciding which ones to pick. I arranged the list from highest to lowest dividend yield and got the top three that displayed consistent dividend payments. For the purposes of this article, consistent dividend payments mean paying a minimum of four quarterly or 12 monthly dividends for the last three years.
That means some companies did not make the cut. Park Hotels & Resorts, supposedly number one on the list, didn’t pay dividends at all in 2021, while Two Harbor Investment Corp only had three “quarterly” payouts in 2022.
Now that I have my list of three, let’s dive into the REIT with the highest yield based on the criteria I provided:
Agnc Investment (AGNC)
AGNC Investment Corporation tops our list today. The company primarily invests in residential mortgage-backed securities (MBS) guaranteed by government-sponsored entities, such as Fannie Mae and Freddie Mac. Its investment focus significantly reduces risk due to government backing, providing attractive risk-adjusted returns to its shareholders.
Source: AGNC Investment Corp via Barchart.com
AGNC has a monthly dividend payout schedule and has consistently paid 12 cents per share every month since May 2020. This reflects an impressive 13.67% yield based on current prices.
AGNC stock is rated a moderate buy based on 14 analysts, with an average score of 4.00. The company has also been consistently topping or meeting analysts’ EPS expectations, giving me confidence that AGNC is a solid long-term investment choice for income investors looking for a good REIT.
Annaly Capital Management (NLY)
Like AGNC, Annaly Capital Management invests in MBS to temper the risks of real estate assets. The company has over 25 years in the industry, with a $75-billion portfolio and $6.3 billion of assets available for financing. The company has been rewarding shareholders since 1997, making it one of the market's oldest and most consistent high-yield REITs.
Source: Annaly Capital Management via Barchart.com
Currently, NLY pays 65 cents per share quarterly, translating to a $2.60 annual dividend rate and a 12.58% yield based on current prices. Though payout slightly fluctuates, the company boosted its dividends from 2022, making it an attractive long-term proposition for income investors. If that’s not enough reason, NLY stock is also rated a moderate buy with a 4.09 average score.
Pennymac Mortgage Investment Trust (PMT)
Investing in MBSs can be high-yielding ATMs, as the third REIT on this list also focuses on government-backed mortgages. Pennymac Mortgage Investment Trust—a telling name—is a specialty finance company that invests in mortgage servicing rights and credit risk transfer investments related to loans from Fannie Mae. Pennymac’s strategy allows it to buy distressed properties at steep discounts, which is why most of its mortgage loans are precisely that.
Source: Pennymac Mortgage Investment Trust via Barchart.com
PMT has paid dividends since 2010, with its current quarterly payout at 40 cents per share. This reflects a $1.60 annual rate and an 11.20% yield. However, PMT stock has the most mixed analyst score out of this list at a 3.50 average, barely passing the moderate buy requirement. This is primarily due to the worse-than-expected EPS report in June, which missed estimates by a glaring 50%.
Final Words
REITs typically offer high returns, but due diligence and a little help from market data websites like Barchart can often reveal the ones that are both high-yield and consistent in their payments. Spend the time researching, monitor your potential investments, and be ready to cut whenever necessary.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
