It’s no secret that the housing sector is … hot, hot, hot, these days. Those firms that have been able to tap into the mania have profited handsomely over the last few years. But it’s not just home builders, suppliers and realtors who have been able to cash in on the surge in home buying. Mortgage-related firms have been riding high as well. And that includes our latest pick in our High-Yield Model Portfolio.
Our firm invests in mortgages and other financial instruments tied to housing. Residential mortgages make up the bulk of its holdings, majority of which are agency/federal-backed securities. This provides an interesting play on the growth of housing – one that yields over 10%.
The key to that high yield is the firm’s structure as a real estate investment trust (REIT). As a REIT, it’s required to pay out the bulk of its cash flows back to its investors. This results in an above-average dividend yield.
Even better is that that dividend comes with a dose of safety in the form of a reduced cost of capital and the backing of government-sponsored mortgages.
You can check out the Best High Dividend Stocks Model Portfolio to explore all the stocks.
