A Steady 7% From 3 Stocks For Investors Who Don’t Want Drama

In the universe of higher yield stock investing, often no news is good news. Income stock investors want to own shares that pay steady dividends from companies that can be counted on to earn enough to cover the dividends quarter after quarter.

Stock market drama usually leads to share price volatility, which is something that makes dividend investors uncomfortable. As a result, often the best dividend stocks don’t make much news in the financial news, which makes it harder for investors to find them.

One group that gets little press but pays steady dividends and attractive yields are the small cadre group of commercial mortgage finance real estate investment trusts (REITs).

REITs are divided into two broad categories. Equity REITs own commercial properties. They earn revenue from rent or lease payments. Finance REITs originate or own portfolios of real estate secured loans. The residential focused REITs usually own highly leveraged portfolios of mortgage-backed securities (MBS).

Commercial finance REITs typically originate loans on commercial properties and hold them in their own portfolios. Commercial finance REITs contrast starkly compared to the more popular residential MBS owning REITs. They are less leveraged, financially more conservative, and have better dividend track records. 

Commercial finance REITs are lower risk and historically have been more stable dividend payers. Commercial mortgages are typically done with variable interest rates, and commercial REITs match their loans with variable debt. They lock in the interest rate spreads, no matter which way interest rates move. These REITs also use a lot less leverage than their residential MBS owning cousins.

If you are looking for 7% to 8% yields where you can count on the dividends for years to come, consider commercial finance REITs. Here are three that I’ve been following for years to get you started.

Blackstone Mortgage Trust, Inc. (BXMT) is a pure commercial mortgage lender. The REIT receives high-quality mortgage lending leads from its sponsor, The Blackstone Group L.P. (BX).

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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