The 12.1% Yield Backed By Uncle Sam?
~ by Robert Baillieul, B.Comm.
Today’s chart highlights my favorite place to find safe seven percent, nine percent, and even 12% yields: mortgage real estate investment trusts (REITs).
Mortgage REITs work like a virtual bank. They borrow money from savers and lend out funds to homeowners. Because “Uncle Sam” backs many of these loans, investors prize these businesses for their safe income.
Case in point: Western Asset Mortgage Capital Corp (NYSE: WMC). This lender invests in residential mortgages with guarantees from federal agencies. And with a payout topping 12%, the stock is worth a second look.
Western is a sleepy business, for starters. The mortgage represents the last bill that people skip during a financial crisis. In the unlikely event of a default, the company stands first in line to get paid.
Furthermore, most of these loans have the backing of Uncle Sam. To encourage lending, federal agencies like Fannie Mae and Freddie Mac have ensured residential mortgages. This meant that even during the height of the 2008 financial crisis, insured mortgage-holders still got paid.
Western is also lucrative, with homeowners having to pay all of the closing costs and insurance premiums. And because Western has no physical branches, the trust has little in the way of overhead.
As a result, this firm gushes profits. Last year, Western generated $0.08 in return on every dollar of equity invested into the business. That number won’t get the Bitcoin bulls out of bed, but it’s impressive when you consider the safety of these loans.
For owners, this translates into a tidy income stream. Western just sits back and goes about handing out their payments each month. They can predict to almost the dollar how much they’ll get paid for years to come.
Most of this income gets passed on to owners. Because of how management structured this business, they must pay out all of their profits to investors. Today, Western sends out a quarterly distribution of $0.31 per unit, which comes out to an annual yield of 12.1%.
Of course, no one is calling this stock a sure thing. Western’s profits depend on the difference between short- and long-term interest rates, called the “spread.” A bump in interest rates would clip profits. And because executives pay out all of the income in distributions, they don’t have a lot of wiggle room if business sours.
That said, management has does a great job hedging these risks. This business continues to generate ample cash flow each and every month. For investors looking to lock in a big yield, WMC stock is one to investigate further.
(The above article has been reprinted with the permission of Income Investors.)
Government Indirectly Funding the Retirement of Thousands of Americans?
Most people have no idea Uncle Sam indirectly sponsors thousands of retirees... by paying out millions of dollars every year into what we call an "8.4% Cash Rebate Fund."
Like Joanna, whose Cash Rebate Fund brings her the equivalent of just over $2,300 every month. Or Sam, who collects $5,138 each month.
CNN Money says they "have long been a go-to investment for retirees looking for reliable income."
U.S. News added that government-endorsed funds like this "are designed to generate income for investors."
Americans are turning to the 8.4% Cash Rebate Fund to juice up their retirement, and so can you!
$122 million in cash-rebate payouts is earmarked to be distributed to Americans over the next 12 months.
To qualify, you must have your name added to the distribution list. And it takes no more than 10 minutes to do so.
To start collecting this cash rebate income, I urge you to watch our FREE video on when you Opt-in for our FREE income e-letter along with our special offers from Income Investors.
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Income Investors is dedicated to delivering timely, trusted and actionable financial news and information to dividend investors. Our mission is to help readers earn higher investment yields and better returns from their portfolios.
Our philosophy is straightforward:
- We believe in simple.If you want to own hot tech stocks, Income Investors isn’t for you. But if you prefer commonsense investing, then you’ll like our approach just fine. Investors adore sexy startups and biotech plays. But over the long term, the best stocks tend to be simple businesses that produce reliable profits that they pay out to shareholders.
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When you own names like these, you no longer have to worry about inflation or bear markets. Many of these firms have paid dividends to shareholders for over a century. For this reason, some of the world’s wealthiest investors—including Bill Gates, George Soros, and Warren Buffett—hold these stocks in their portfolios.
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Jing was co-founder of E-Learning’s Online Tutoring Service in Beijing, China; a project analyst at BMO Capital Markets; and a graduate research assistant at the University of Toronto.
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His investment philosophy is simple: stick to companies with durable, competitive advantages, rock-solid financials, and talented management teams—then wait patiently to buy them at a reasonable price. The magic of compounding will take care of the rest.
It’s the most proven formula for building long-term wealth, so he figures, “Why mess with what works?”
Prior to joining Income Investors, Brian spent 10 years researching and writing about stocks for one of the largest multimedia financial services companies in the world. He has also served as a tech-sector analyst for the world’s largest crowd-sourced platform for investment research.
Brian has a BA from Western University and holds the Chartered Financial Analyst designation.
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If you’re interested in dependable income, Gaurav believes there’s one key term you need to know: “Global Dividend Growers” (GDGs). GDGs are some of the biggest, most profitable companies in the world. Their entrenched position translates into steady revenues, thick profit margins, and robust cash flows. This allows them to produce market-beating returns and grow oversized dividends year after year.
These stocks are the “Ivy League Elites” of the market. Dozens of the companies on this list have paid rising dividends for decades, even through the financial crisis of 2008. Many long-time stockholders are collecting triple-digit yields based on the price of their original purchases.
Gaurav holds a BA in Business Economics from York University. Prior to joining Income Investors, he worked as a trader for TD Bank and in private wealth management for Canaccord Genuity.
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