SEC Threat Takes Allure Away From REIT Dividends
20 Septembre 2011 - 2:16PM
Marketwired
With the VIX volatility index pushing towards record levels over
the last month, long term investors have turned their attention to
safe haven plays. Investors usually count on dividend paying stocks
during hectic times in the market believing in the company's
security and real earnings power. Additionally, when interest rates
get as low as they currently are, the return on dividends can far
exceed that of bonds. The Bedford Report examines the outlook for
diversified REITs and provides equity research on American Capital
Agency Corporation (NASDAQ: AGNC) and Annaly Capital Management,
Inc. (NYSE: NLY). Access to the full company reports can be found
at:
www.bedfordreport.com/AGNC
www.bedfordreport.com/NLY
Real Estate Invest Trusts (REITs) have some of the highest
yields on Wall Street. To be classified as a REIT, a company must
distribute at least 90 percent of its taxable income to
shareholders annually in the form of dividends.
Earlier this month mortgage REITs took a sizeable hit after the
Securities and Exchange Commission launched a review that could
subject these companies to tighter regulation. The SEC announced
that it will solicit public comment to determine if mortgage real
estate investment trusts should be regulated as investment
companies and therefore subject to the Investment Act of 1940. The
SEC noted the Investment Act didn't foresee the explosive growth of
mortgage securities or the flood of other mortgage investors that
have entered the industry. According to The Wall Street Journal a
big concern for mortgage REITs is they will lose their ability to
employ high levels of leverage if they are subject to the
Investment Act. Mortgage REITs have high dividend yields partly
because the managers use high leverage, which can boost
returns.
The Bedford Report releases stock research on REITs so investors
can stay ahead of the crowd and make the best investment decisions
to maximize their returns. Take a few minutes to register with us
free at www.bedfordreport.com and get exclusive access to our
numerous analyst reports and industry newsletters.
Agency Mortgage REITs such as American Capital Agency and Annaly
have portfolios made up principally of mortgages insured by the
federal agencies Fannie Mae, Freddie Mac and Ginnie Mae. They
typically borrow at low rates and lend in the mortgage markets at
higher rates, usually by buying mortgage-backed securities.
Presently Annaly Capital Management pays an annual dividend of
$2.60 for a yield of 14.5 percent. American Capital Agency pays an
annual dividend of $5.60 per share for a hefty yield of around 19
percent.
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