NEW YORK, NY -- (Marketwire) -- 03/27/13 -- Real estate investment trusts (REITs) that invest in mortgage-backed securities have continued to attract investors with double digit gains and high yielding dividends. The iShares FTSE NAREIT Mortgage Plus Capped ETF (REM) has gained nearly 15 percent year-to-date. Research Driven Investing examines investing opportunities on diversified REITs and provides equity research on ARMOUR Residential REIT, Inc. (NYSE: ARR) and Chimera Investment Corporation (NYSE: CIM).
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REITs are a popular play in the current economy due to their steady dividends, which currently averages around 13 percent, nearly 7 times the average dividend yield of the S&P 500. REITs can avoid corporate income tax, provided they invest in real estate-related assets and pay out at least 90 percent of their income in dividends to investors.
"Despite their run, REITs remain attractive to income investors. But we warn our clients that funds using stock REITs are very different animals than those buying mortgages," says Matt Reiner, chief investment officer at Capital Investment Advisors. "Compared to Treasuries, mortgage REITs are paying much better yields -- and we don't see that trend reversing soon," says Reiner.
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ARMOUR is a Maryland corporation that invests primarily in hybrid adjustable rate, adjustable rate and fixed rate residential mortgage-backed securities issued or guaranteed by U.S. Government-sponsored entities. The company recently declared a monthly dividend rate of $0.07 per share, for a dividend yield of roughly 13.2 percent.
Chimera Investment Corp. invests in residential mortgage loans, residential mortgage-backed securities, real estate-related securities and various other asset classes. The Company's principal business objective is to generate income from the spread between yields on its investments and its cost of borrowing and hedging activities. The company offers a quarterly dividend of $0.09 per share, for a dividend yield of roughly 11.0 percent.
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