What if it was attainable to make 10%, 20% or extra in annual dividend earnings on an actual property funding belief (REIT) inventory? Does the thought of a double-digit dividend yield conjure up photos of a brand new sports activities automotive, yacht or mansion? Well, not so quick. REIT shares with double-digit dividend yields are among the many highest dangers in the marketplace. An investor may earn a 12% dividend, solely to see their inventory drop 20% in that yr. That first dividend is sweet, however what if the corporate cuts the following yr’s dividend by 55%?Here are just a few examples of REITs with extremely-excessive dividends and the efficiency dangers they’ve demonstrated previously.Orchid Island Capital Corp. ORC is a finance firm that invests in U.S. residential mortgage-backed securities. The Florida-based firm initiated an IPO in March 2013 at a value of $14.50. And from the very starting, it paid a month-to-month dividend of $0.135 for an approximate annual yield of 11%. Investors who purchased ORC on the IPO value fortunately captured a fair bigger dividend yield the next yr when ORC raised the dividend to $0.18 per thirty days. But in 2015, the corporate abruptly minimize the dividend again to $0.14 per thirty days, the place it remained for 2 years. In 2018, it additional decreased the month-to-month dividend to $0.11, after which a number of extra cuts ensued over time till reaching the present dividend quantity of $0.045 a month. Along with the dividend, the worth has additionally declined significantly over time. Today, ORC shares are solely $2.88. So an investor who purchased on the IPO would have misplaced 80% of the inventory’s worth whereas gathering smaller and smaller dividends over time.ARMOUR Residential REIT Inc. ARR is a mortgage REIT that, 5 years in the past, went for $26.50 and paid $0.19 quarterly dividends for the following two years. But like ORC, the quarterly dividend was minimize to $0.17 in 2019 after which slashed to $0.10 in 2020. In 5 years, the inventory has additionally declined to a present value of $7.36. Some of the issues with ARR are poor money movement, detrimental earnings and income points. And it could seem that the lengthy-time period dividend isn’t secure with this inventory.ARR boasts a present dividend yield of over 16%. But given the corporate’s historical past, is it price taking an opportunity? Most buyers would run from this excessive-threat inventory.Office Properties Income Trust OPI is a Massachusetts-based actual property firm that owns, leases and manages workplace house. Many of its tenants are stable, and their portfolio even contains authorities workplaces. And but, in September 2018, OPI was a $48 inventory with a 14% dividend yield. It nonetheless sports activities a 12.2% dividend yield; nonetheless, OPI closed as we speak at $18.02. It takes a whole lot of dividend funds to make up for a 62% lack of inventory worth in solely 4 years.What makes OPI so dangerous is that it has produced declining income and earnings per share (EPS) over the previous three years. In truth, in Q2 of 2022 EPS was a detrimental $16 million. In unstable markets, buyers need to see elevated income and EPS. So they shun shares like OPI, even when the dividend yields are enticing.Investors ought to do their homework earlier than shopping for any REIT inventory, however that’s very true when contemplating one with such a excessive dividend yield. Such shares are sometimes market laggards which even robust dividends fail to beat.Today’s Real Estate Investing News Highlights
The Bezos-backed actual property funding platform Arrived Homes launched a brand new batch of choices to permit retail buyers to buy shares of single-household rental properties with a minimal funding of $100. The platform has already funded over 150 properties with a complete worth of over $50 million.
The CalTier Multi-Family Portfolio Fund lately accomplished a brand new funding in a portfolio of 4 multi-household properties consisting of 185 models. The CalTier Multi-Family Portfolio Fund is likely one of the few non-traded actual property funds out there to non-accredited buyers and has a minimal funding of $500. Year so far, the fund has produced an annualized money-on-money return of seven.02%.
Find extra information and actual property funding choices on Benzinga Alternative InvestmentsImage by William Potter on Shutterstock
https://www.benzinga.com/markets/penny-stocks/22/08/28672754/passive-income-stream-or-yield-trap-are-high-dividend-reits-worth-the-risk
