REITs like CYS Investments (CYS) are very special for yield and dividend investors because, in order to retain their tax exempt status, they must distribute at least 90% of their annual income to shareholders as dividends. As a result, REITs generally offer dividend yields well in excess of what you can get from other companies. The downside is that there is some volatility in the level of dividends paid from year to year, and you could see large dividends when there are high profits, or small payouts or no payouts in less profitable or losing periods. Income investors are primarily interested in stocks that produce stable and high dividend yields and are available at reasonable valuations.
In the case of CYS, equity analysts at Wells Fargo have given the company an "outperform" rating, based on a range of factors that include an experienced and accomplished management team, strong risk management controls and procedures and the fact that the company is managed to align the interests of both management and investors closely. In my opinion, there are many reasons to favorably consider an investment in CYS now.
Like the other companies in the REIT industry, CYS stands to gain from the decision of the Federal Reserve to keep the Fed funds rate low at near 0% until the end of 2014 and possibly into 2015. This means that there is unlikely to be any diminution in the value of the CYS investment portfolio until this rate is changed. This is also likely to preserve the interest spread, which is the difference between what CYS earns and what it pays on its borrowings, and represents its net income. This could of course change, if lenders, independent of the Fed, perceive a higher risk in accepting mortgage backed securities as collateral, and proceed to raise their lending rates to compensate for the additional risk.