This Real Estate Stock Is Yielding 14.6%!

• Real property concern trusts (REITs) are known for paying beardown dividend yields, mostly owed to their unsocial firm structure.

• But investors should beryllium wary of ultra-high dividend yields similar this.

• 10 stocks we similar amended than Dynex Capital ›

When evaluating dividend yields, I mostly see a sustainable 3% output to beryllium precise solid. When I precocious saw Dynex Capital's (NYSE: DX) monolithic 14.6% trailing 12-month dividend yield, I was skeptical, to enactment it mildly.

However, the institution has been making accordant monthly dividend payments dating each the mode backmost to 2008, though the dividend has fluctuated a bit. Still, with a output arsenic precocious arsenic this, a small fluctuation is OK arsenic agelong arsenic the institution consistently makes dividend payments.

Dynex is simply a existent property concern spot (REIT), which means it tin debar paying firm taxes arsenic agelong arsenic it distributes astatine slightest 90% of its taxable income successful the signifier of dividends to shareholders, among different requirements related to its existent property activities. But investors should beryllium wary of dividend yields that look excessively bully to beryllium true.

Dynex Capital is simply a owe REIT and invests heavy successful residential mortgage-backed securities. This tin pb to utmost fluctuation successful the company's earnings, which tin besides beryllium heavy impacted by the question of involvement rates.

While Dynex has a bully way record, its payout ratio is high, and its trailing 12-month free-cash-flow output is present importantly little than the company's dividend yield. These are often important reddish flags erstwhile evaluating dividend stocks.

Now, this doesn't mean the institution volition ever outright destruct its dividend. And if the institution could connection a dividend output of 10% oregon 12% implicit the agelong term, that would inactive beryllium incredibly strong. However, Dynex is hard to measure due to the fact that absorption employs a highly analyzable hedging strategy, utilizing a important magnitude of derivatives, including involvement complaint swaps and futures, to negociate the equilibrium expanse done antithetic involvement complaint environments.

Ultimately, I deliberation investors tin instrumentality a changeable connected the banal for passive income, but I wouldn't suggest making it 1 of your apical dividend holdings.

Before you bargain banal successful Dynex Capital, see this:

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