U.S. Markets close in 3 hrs 49 mins

2 Better-Banking REITs With Monster Yields

Neil George

Banking isn’t necessarily a complicated business. And I know this as former banker both in the U.S. and in other markets. You raise capital from shareholders. Then you raise additional cash from deposits and debt. And then you build a portfolio of assets made of loans and other interest-bearing securities.

The goal of a successful bank is to pay less on your liabilities that what you own on your assets. This is otherwise known as your net interest margin.

This, of course, is a moving target. Interest rates rise and fall both for short- and longer-term liabilities and deposits so successful banks need to constantly be working to limit the risk of paying more than what they’re earning.

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

And banks also need to make sure that their liabilities, depositors and lenders remain content to keep funding them. And at the same time, keep an eye like a hawk on the credit conditions and performance of their assets in their loans and securities.

There are many traditional banks in the market that are doing great jobs for their shareholders especially in the current improving banking market with normalizing interest rates and regulatory reforms.

But there’s another way to invest in the business of managing liabilities and assets that pay investors much more than the average bank stock. And the format of a real estate investment trust (REIT) makes for a better way to cash in for individual investors.

REITs are not just about buying properties and collecting rents. They can also invest in real estate loans and mortgages. The REIT structure provides the benefit of not having to pay corporate income tax on the company level by paying investors the majority of profits in dividend income.

And thanks to the Tax Cut & Jobs Act of 2017 (TCJA), dividends paid to shareholders also get a new tax advantage as 20% of dividends paid are deducted from their taxable distributed income. This makes the dividend that much more valuable for individual investors.

Mortgage REITs, when well managed like any good bank, provide investors with stable cash-generating loan assets with dividend income along with some potential for appreciation as the REITs build their company values.

Invest in New York Mortgage Trust

The first REIT to look at is New York Mortgage Trust (NYSE:NYMT). This REIT came to the public market in 2004 and made it successfully through the mortgage market mess of 2007-2008 and continued to attract additional capital in a series of additional share sales in 2014.

New York Mortgage Trust focuses on multi-family property mortgages and mortgage securities backed by multi-family properties. This continues to be a great market with sharply rising demand for residential units in major metropolitan markets in the U.S. And with rising rents, the underlying mortgages continue to be well defended by rising revenues for the underlying property assets.

In addition, multi-family properties tend to be more stable in their mortgages. For unlike single-family residences that will see families move — multi-family residences will see ownership remaining much more stable. This means that mortgages will be more stable in their cashflows with fewer prepayments due to fewer property sales. This helps the REIT to more easily forecast cashflows and better match up their assets and liabilities.

New York Mortgage Trust continues to expand its portfolio of loans. And revenues continue to advance with the trailing 12 months seeing revenue gains of 22.1%. And the REIT is run on a very efficient basis with the implied efficiency ratio of 31.3%, which means that it costs only 31.3 cents to earn each dollar of revenue.

And the spread between the interest cost of its liabilities and its interest-earning mortgages is at a healthy 3.3%. And while its return on assets is a tick less than average for a bank at 0.9%, the return on the equity of shareholders is a very healthy 12.6%.

The quarterly dividend of 20 cents provides a very nice yield of 13.1%. And the return for shareholders for the past ten years is a whopping 339.87% or an average annual equivalent of 15.96%.

And the best part is that you can buy this REIT at roughly its book value with a current stock price of $6.14 a share.

Another REIT Stock to Bank On

Then there’s my long-time favorite in the mortgage REITs that I’ve followed and recommended regularly for many years in MFA Financial (NYSE:MFA).

MFA is also in the mortgage market. But unlike New York Mortgage Trust, it invests in a variety of different types of underlying mortgage loans and related securities. This provides a bit more security of management’s ability to spread their invested assets across more and differing loan assets.

And it has done this very well. And even during the dark quarters of 2007 and 2008, the company remained profitable.

Its revenues have been a bit on the decline with a reduction in the liabilities and assets as the company has been defensive over the past year in managing its portfolio.

But the dividend paid quarterly remains constant at 20 cents providing a nice dividend yield of 10.28%.

Its return for shareholder over the past ten years has been 287.71% equating with an average annual equivalent of 14.50%.

And it is also a bargain right now with the shares trading around $7.77 making them valued at just a tick above the underlying book value of the REIT.

Neil George is the editor for Profitable Investing and by company policy does not have any current holdings in the securities mentioned above.

More From InvestorPlace

Compare Brokers

The post 2 Better-Banking REITs With Monster Yields appeared first on InvestorPlace.

  • Finance
    CNBC

    Here's the tax bite on $1.6 billion Mega Millions and $620 million Powerball jackpots

    Strategies can be employed to reduce the amount of your win that is taxed, although they are best explored with the help of an experienced tax advisor. While it's anyone's guess who will end up winning the Mega Millions and Powerball jackpots, there's at least one guaranteed recipient of a chunk of the loot — the IRS. With the Mega Millions jackpot at $1.6 billion and Powerball's top prize at $620 million, that tax bill will be hefty even if the winner employs strategies to reduce their taxable income.

  • Business
    CNBC

    Here's how much money you should have saved by 50

    Fidelity, the nation's largest retirement-plan provider, recommends having the equivalent of six times your annual salary saved. To get to that number, Fidelity recommends saving 15 percent of your annual income. Make sure to invest these funds instead of leaving them in a traditional low-interest savings account.

  • Why AMD Stock Fell 11% on October 19
    Finance
    Market Realist

    Why AMD Stock Fell 11% on October 19

    Semiconductor (SMH) stock Advanced Micro Devices (AMD) fell 11.1% on October 19 to close trading at $23.66. New Street Research analyst Pierre Ferragu has a 12-month price target of $18 for AMD. Ferragu stated, “AMD’s stock price reflects a scenario we don’t believe possible.

  • What the Market Missed in Kinder Morgan Inc.'s Results
    Business
    Motley Fool

    What the Market Missed in Kinder Morgan Inc.'s Results

    Kinder Morgan (NYSE: KMI) can't seem to catch a break these days. Despite its completing what management dubbed a "momentous" quarter, shares of the natural gas pipeline giant barely budged this week. It was a head-scratching outcome considering that its financial results came in well above its guidance, which the market seems to have completely missed.

  • Investors Dumped Cannabis Stocks after Legalization Last Week
    Finance
    Market Realist

    Investors Dumped Cannabis Stocks after Legalization Last Week

    Cannabis Stocks Getting Dumped after Legalization? Cannabis sector Last week, the overall cannabis sector ended in negative territory. The Horizons Marijuana Life Sciences ETF (HMMJ) lost almost 5.4% of its value, while the Emerging Marijuana Growers

  • Finance
    Barrons.com

    Dow Drops 142 Points Because the U.S. Is Not China

    STOCKSTOWATCHTODAY BLOG 10:03 a.m. That didn’t take long. After opening up this morning, the three major index’s have slipped into the red. The S&P 500 has dropped 0.6% to 2751.32, while the Dow Jones Industrial Average has declined

  • Business
    Benzinga

    Insider Buys Of The Week: FedEx, JPMorgan And More

    Conventional wisdom says that insiders and 10 percent owners really only buy shares of a company for one reason -- they believe the stock price will rise and they want to profit from it. One BlackRock, Inc. (NYSE: BLK) director has stepped up to the buy window again. Jim Cramer recently recommended holding on to BlackRock shares even at 52-week lows.

  • 49ers hope partnership with software giant will help sell more $10 beers and improve game day for fans
    Finance
    American City Business Journals

    49ers hope partnership with software giant will help sell more $10 beers and improve game day for fans

    The San Francisco 49ers are watching. With the help of software giant SAP SE, the National Football League franchise is gathering game-day information, culling the data and executing new, real-time plays to quickly clean dirty bathrooms, beef up hot dog sales and more. While that won’t directly help the on-field product, 49ers leaders hope teaming tech and customer service will drive more fans back to Levi’s Stadium — win or lose — and score more revenue.

  • Battle of the birds: These SJC airlines will fight for the San Jose-Hawaii market
    Finance
    American City Business Journals

    Battle of the birds: These SJC airlines will fight for the San Jose-Hawaii market

    If you want to vacation in Hawaii, perhaps you should go next year when the fare war breaks out on the air route between San Jose and the islands. It’s a battle that promises a minimum of spilled red blood but perhaps the hemorrhaging of significant quantities of green cash when low-cost behemoth Southwest Airlines Co. enters a market now shared by Hawaiian and Alaska airlines. Some number approaching 600,000 passengers — around 5 percent of Mineta San Jose International’s 13.5 million passengers — flew between SJC and Hawaii in the 2017-18 fiscal year.

  • Will Altria Make Its Marijuana Move This Week?
    Business
    Motley Fool

    Will Altria Make Its Marijuana Move This Week?

    It's been a tough year for Altria Group (NYSE: MO) and most of its tobacco-stock peers. Amid all this controversy, marijuana stocks have been all the rage in the investing community. Altria is set to present its third-quarter financial results on Thursday, Oct. 25, and most investors expect the tobacco giant to find more ways to increase its earnings at a healthy pace even as sales growth stays modest.

  • $100 Billion Pot Companies? These 3 Stocks Could Be the First
    Business
    Motley Fool

    $100 Billion Pot Companies? These 3 Stocks Could Be the First

    Marijuana stocks have been taking off, and investors have never been more excited about the prospects for the cannabis industry. Now that recreational marijuana is legal in Canada, Canadian cannabis companies have come to the forefront, with companies like Canopy Growth (NYSE: CGC) and Tilray (NASDAQ: TLRY) seeing especially high interest among marijuana investors. Tilray CEO Brendan Kennedy recently said that he expects the marijuana industry to produce stocks with market capitalizations in excess of $100 billion in the future.

  • 3 Dividend Stocks to Fund Your Retirement Nest Egg
    Business
    Motley Fool

    3 Dividend Stocks to Fund Your Retirement Nest Egg

    Dividend stocks play a key role in a good retirement portfolio, but investing indiscriminately in companies just because they offer a big yield or have a recent history of payout growth will likely cause your portfolio's performance to fall short of its

  • Finance
    American City Business Journals

    Microsoft's typical worker makes $168K a year — how that compares with Facebook, Google, PayPal, Box, Salesforce, Intel and other big Bay Area tech employers

    Microsoft Corp. is the latest major Silicon Valley tech employer to reveal just how much its typical employee earns — and how that compares with its top executive. The software giant's median employee pay — almost $168,000 — is high, even by Silicon

  • 4 American Tourists On Bachelor Party Killed in Costa Rica Rafting Tragedy
    U.S.
    Meredith Videos

    4 American Tourists On Bachelor Party Killed in Costa Rica Rafting Tragedy

    Four American tourists and a local guide were killed in a rafting incident in Costa Rica on Saturday, authorities said.

  • Finance
    Investopedia

    The Berkshire Hathaway of Pot Will Begin Trading on the NYSE Tuesday

    Aurora Cannabis Inc. ( ACB) has confirmed that its shares will begin trading on the New York Stock Exchange (NYSE) Oct. 23. The Edmonton, Canada-based company, referred to in some circles as the Berkshire Hathaway Inc. ( BRK.B) of cannabis because of its successful track record investing in other firms, said its shares will trade under the ticker “ACB,” the same symbol it uses in its separate Toronto Stock Exchange listing. Aurora will become the third licensed Canadian cannabis company to list in the U.S. after Canopy Growth Corp. ( CGC) and Tilray Inc. ( TLRY).

  • What to Watch When First Solar Reports Earnings
    Business
    Motley Fool

    What to Watch When First Solar Reports Earnings

    It's been a wild 2018 for First Solar (NASDAQ: FSLR) and its stock. When First Solar reports earnings after the market closes on Thursday, Oct. 25, investors will get a better idea of how the company is faring. The decline was in large part because of falling demand in China and dropping commodity solar panel prices, which may fall by one-third this year.

  • eBay Stock Dropped after Analyst Downgrade
    Finance
    Market Realist

    eBay Stock Dropped after Analyst Downgrade

    The recent pullback has meant that eBay has fallen 24% in 2018. During its earnings call, PayPal (PYPL) reported a slowdown in merchandise volume at eBay, which led to a downgrade in stock ratings for the company. According to PayPal, eBay’s TPV (total payment volume) rose 3% YoY (year-over-year) in the third quarter compared to a 6% rise in the prior two quarters of 2018.

  • Better Buy: Ford Motor Company vs. General Motors
    Business
    Motley Fool

    Better Buy: Ford Motor Company vs. General Motors

    Both Ford Motor Company (NYSE: F) and General Motors (NYSE: GM) have been investor favorites in the not-too-distant past, and both pay good dividends. Ford has a slew of new products on the way, starting with a brand-new Ranger pickup early next year. Ford and GM have both had a rough year in the stock market.

  • 3 Dividend Stocks That Pay You More Than Coca-Cola Does
    Business
    Motley Fool

    3 Dividend Stocks That Pay You More Than Coca-Cola Does

    With a better than 50-year history of paying dividends, Coca-Cola (NYSE: KO) is seen as an icon of stable, strong, secure payouts. Although Coke and its dividend are not in trouble, there are better investments to be found. Three stocks that these Motley Fool contributors particularly like are Dominion Energy (NYSE: D), AbbVie (NYSE: ABBV), and MGM Growth Properties (NYSE: MGP).

  • Intuitive Surgical Reported Strong Third-Quarter Results
    Finance
    Market Realist

    Intuitive Surgical Reported Strong Third-Quarter Results

    Intuitive Surgical (ISRG) released its third-quarter results on October 18. Following strong growth in da Vinci procedures, the company’s total revenues increased from $807.8 million in the third quarter of 2017 to $920.9 million in the third quarter. Most of the growth came from sales of instruments and accessories at $486.3 million in the third quarter—compared to $401.2 million in the third quarter of 2017. Intuitive Surgical’s systems revenues increased from $262.0 million in the third quarter of 2017 to $274.6 million in the third quarter. Intuitive Surgical reported a net income of $292.5 million in the third quarter—compared to a net income of $298.6 million in the third quarter of 2017.

  • 5 Popular Marijuana Stocks I Wouldn't Buy With Free Money
    Business
    Motley Fool

    5 Popular Marijuana Stocks I Wouldn't Buy With Free Money

    Last week on Oct. 17, Canada lifted the curtain on nine decades of prohibition and legalized recreational marijuana for adults. Given the notable surge in pot stocks since the beginning of 2016, it's pretty evident that Wall Street and investors expect the industry to be a resounding success. With that being said, there are a handful of marijuana stocks -- some quite popular -- that I simply wouldn't buy, even if I were given free money to do so.

  • The Top Marijuana Dividend Stock Most Investors Know Nothing About
    Business
    Motley Fool

    The Top Marijuana Dividend Stock Most Investors Know Nothing About

    Marijuana stocks have been all the rage in the investing world lately, and those who are interested in investing in the space have quickly gotten up to speed about some of the basic ways to make money in the cannabis business. The best-known pure-play marijuana stocks specialize in the growing of raw marijuana plants and the production of refined cannabis products, and many marijuana investors have placed their bets on various companies after making informed choices about whether a particular business has a competitive advantage that will help differentiate it from the many other competitors in the cannabis industry.

  • Vertex Pharmaceuticals: Q3 Earnings Forecast
    Finance
    Market Realist

    Vertex Pharmaceuticals: Q3 Earnings Forecast

    Vertex Pharmaceuticals (VRTX) is scheduled to report its third-quarter earnings on October 24. Analysts expect Vertex Pharmaceuticals’ revenues to increase 43.3% from $551.87 million in the third quarter of 2017 to $790.9 million in the third quarter of 2018. During the last four quarters, Vertex Pharmaceuticals’ revenue growth was 32.48%–45.33%.

  • This Warren Buffett Stock Is Dirt Cheap Right Now
    Business
    Motley Fool

    This Warren Buffett Stock Is Dirt Cheap Right Now

    Warren Buffett has amassed a large portfolio of bank stocks for Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) with major holdings in Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and American Express (NYSE: AXP), just to name a few of the most well-known and largest investments. Synchrony is a major issuer of store-branded credit cards and also operates a rapidly growing online banking platform.