Author Topic: high dividend reits  (Read 356 times)

Montecarlo

  • Pencil Stache
  • ****
  • Posts: 671
high dividend reits
« on: August 17, 2020, 08:36:31 AM »
I did a search on this website, and most of what I found was 5+ years ago. 

Looking at high dividend REITs, like NLY, seems super attractive.  I get concerned about the business model.  Seems like they rely on short term interest rates being low to borrow cheap, and then plow it into MBSs?

The fact they survived the great recession gives me reason to think it's a reasonable investment.

But if rates rise, don't they face two headwinds:
1 - higher financing costs, possibly higher than their yields on their securities
2 - lower market value of their securities

This seems to me the making of a "oh shit, yesterday we were fine, today we're insolvent" situation, like XIV.

It seems to me a logical play would be to:
1 - put a small amount of your portfolio in
2 - reinvest 10% of the dividends, put the remaining 90% of dividends in a separate investment
3 - hope you make it 6-7 years before the time bomb goes off

Montecarlo

  • Pencil Stache
  • ****
  • Posts: 671
Re: high dividend reits
« Reply #1 on: August 18, 2020, 03:38:52 PM »
Bumpity bump bump