3 High Dividend REITs Yielding Over 10%

Investors looking for high dividend yields often turn to more defensive sectors. These include dividend favorites such as consumer staples, utilities, and healthcare. But a sector that has consistently provided strong yields is that of real estate investment trusts, or REITs. These are stocks that exist virtually entirely to generate income that is then substantially completely returned to shareholders via dividends. Not all REITs are created equal, however, and some are much more attractive than others. Here, we'll look at three high dividend yield REITs that we like. Orchid Island Capital Our first high-yield REIT is Orchid Island Capital , a specialty finance REIT that invests in residential mortgage-backed securities, or RMBS, in the U.S. Unlike physical property REITs, Orchid Island invests in securities that are backed by real estate. The trust, therefore, doesn't own any actual property, but generates its income through investing in income-producing securities. Orchid Island was formed in 2010, should generate somewhere around $170 million in revenue this year, and trades with a market capitalization of just under $400 million. Orchid Island's dividend is attractive not only because it is producing a very high yield, but because the stock pays its dividend monthly, rather than the typical quarterly schedule. This allows investors to receive income to live off of more frequently than the quarterly schedule, or to compound wealth more quickly by receiving more frequent payments. Whatever the ultimate use, monthly dividends are preferred to quarterly ones, and Orchid Island is one of very few stocks that pay more frequently than quarterly. Orchid Island has cut its dividend repeatedly in recent years. We some times see this with REITs because they are legally required to distribute substantially all of their income to shareholders. That can lead to very strong dividend growth during good times, but can obviously lead to cuts when times are lean. Given the interest rate environment of the past few years, mortgage REITs like Orchid Island have struggled to generate the same spreads they were used to. In 2014, Orchid Island paid 18 cents per share monthly. The stock has seen its dividend cut six times since then, and the current dividend is 5.5 cents per share monthly. However, the share price has declined in sympathy, and that 5.5 cents monthly is good for an absolutely massive 16% yield. That's more than 13 times that of the S&P 500, so Orchid Island is a truly exceptional dividend stock from a yield perspective. Investors must keep in mind that Orchid Island's dividend can move up or down fairly frequently given prevailing business conditions, but for an extremely high yield, we like the stock. Armour Residential REIT Armour Residential is another mortgage REIT that invests in various securities that are generally backed by residential mortgages in the U.S. Armour invests in all sorts of residential mortgage-backed securities, including fixed rate, hybrid rate, adjustable rate, and unsecured notes. It invests in agency securities, which are those that are government-sponsored, and are generally safer than those that aren't. Armour was founded in 2008, should generate about $160 million in revenue this year, and trades with a market capitalization of $824 million. That makes it one of the larger mortgage REITs available to investors today. Like Orchid Island, Armour has a spotty dividend history. The REIT pays monthly as well, like Orchid Island, which is an attractive feature. However, Armour has cut its dividend no less than 11 times in the past decade, for the same reasons that Orchid Island has cut its dividend. But also like Orchid Island, the share price has moved in sympathy, and the current yield for Armour is incredibly strong for new investors. Indeed, the current monthly dividend is 10 cents per share, or $1.20 per share annually. That $1.20 is good for a 12.8% dividend yield on the recent share price, which is just over $9. That's also about ten times that of the S&P 500, so again, the yield here is quite exceptional. When one considers that exceptional yield is paid monthly, instead of quarterly, it's all the more attractive. Two Harbors Investment Corp. Our final stock is another mortgage REIT, Two Harbors Investment . The REIT focuses on agency residential mortgage-backed securities, like the others in this list, and invests in a wide variety of such securities. Two Harbors was founded in 2009, generates about $180 million in annual revenue, and trades with a market capitalization of $1.9 billion. On that measure, it's more than twice the size of the others on this list. Unlike the other two mortgage REITs on this list, Two Harbors pays its dividend on a quarterly basis, rather than monthly. That is one mark against Two Harbors against the other two, but it is still quite attractive in its own right, particularly if the investor doesn't mind the less frequent payout schedule. Two Harbors has paid a highly variable dividend over the years, similar to most mortgage REITs. The dividend has moved up and own, rather than just moving lower, but over time, the trend has certainly been down. Still, with the share price where it is today, the yield is quite attractive. The quarterly payout a decade ago was 74 cents per share; it is 17 cents today. That's still good enough for a current dividend yield of 11.8%, which is roughly ten times that of the S&P 500, so even with the lower payout, Two Harbors is an outstanding income stock on a yield basis. Final Thoughts While mortgage REITs aren't necessarily for everyone, those looking for very high levels of income could certainly consider the sector. The three we've highlighted here -- Orchid Island, ARMOUR, and Two Harbors -- offer massive current dividend yields, and two of them are paid monthly rather than quarterly. For these reasons, we like the stocks of these mortgage REITs, as they're among the best of the best in terms of absolute dividend yield available to investors today.

3 High Dividend REITs Yielding Over 10%

These names offer massive current dividend yields, and two of them are paid monthly rather than quarterly.

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