Danger Lurks for These 2 REIT Dividends
Broadly speaking, individual investors who like real estate investment trusts (REITs) tend to have a focus on income. That's exactly what REITs are designed to produce, so this makes sense. However, you need to understand what you own because all REITs are not created equally. That's particularly true when you consider names like Annaly Capital Management (NYSE: NLY) and Armour Residential REIT (NYSE: ARR) because of their double-digit yields.
Annaly's dividend yield is currently around 14%. Peer Armour REIT sports an even higher yield of over 16%. If you like dividends, those figures probably sound pretty enticing. Perhaps too enticing.
And yet, by passing on at least 90% of their taxable income to shareholders as dividends, REITs are specifically designed to provide notable dividend payments. So maybe those elevated yields aren't as troubling as they seem? For most income investors, where reliable dividends are a key piece of the investment thesis, the risks are simply too high to bother with either of these two mortgage REITs.
Source Fool.com
