REITs are dividend-paying entities that own or finance real estate.
If you’re targeting higher-than-average yields without excessive risk, you can find good options yielding 4% to 8%. You'll see some of these below. Yields above 10% are achievable, but they’re likely to involve more volatility in share price and dividend amount.Invesco Mortgage Capital
So, yes, IVR has an impressive yield. But it comes with the risk of ongoing share price declines and additional dividend cuts. For many investors that trade-off isn't worth it, particularly when the economic outlook remains uncertain.Some investors will take the opposite perspective on IVR and other mortgage REITs–that the underlying issues are temporary. In that case, these downtrodden REITs may have lots of long-term upside.
Another yellow flag is a complex business model. Complexity adds risk. Mortgage REITs, for example, buy and sell mortgages and mortgage-backed securities so they are more sensitive to interest rate changes than equity REITs. Depending on the type of mortgages they finance, default risk may also be a factor.REITs pay out 90% of their taxable income to their shareholders. That doesn't leave much funding for business expansion.
Even at low levels, inflation destroys wealth, but at current rates it’s downright deadly. Defend yourself with dividend stocks that raise their payouts faster than inflation.
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