Let's chat about some of your top picks. You like real estate investment trusts. Why?
Well, yes. They have that REIT title. But the ones I like own agency-backed paper. They are simple structures. They lever from six to eight times. They buy this agency-backed paper, which has the implicit guarantee of the U.S. government. With interest rate spreads where they are today, they are generating yields of anywhere from the upper-teens to upper-20s on a dividend basis.
In that space, you particularly like the look of American Capital Agency (nasdaq: AGNC - news - people ). How come?
They are trading well below book value. Book value is about $18.50. They declared a dividend of $0.31, covering the period from May 20 through the end of the second quarter. That's 27 days. Annualize that and you get a dividend that is up over $4, which isn't too shabby. That yield takes you into the upper-20s, from where the stock trades today.