Know The Best Income Investments are On Sale Now

Thu, Jan 17, 2013

Best Income Investments Today

best income investmentsThe New Year has begun and as usual, the doomsayers have predicted this year to be the next big crash again. Of course, they also called that last year, the year before that, the year before that and on and on.

Still there has only been one major crash in the last 10 years. There’s only one major stock market crash about every seven years on average. So you can’t spend all of your time worrying. You’ve got to look at the opportunities presented to you.

Right now, one of the best investment opportunities for generating dividend income from stocks is also the cheapest it has been in five years.

Deep Value and Double Digit Yields All in One

One of the best income investments are a special type of Real Estate Investment Trust (REIT).

This special type of REIT also pays the highest dividends and, if bought when they’re this cheap, some of the safest investments available.

The REITs I’m talking about are Mortgage REITs.

These REITs essentially borrow money, take the borrowed money and buy mortgages, and then pay out at least 90% of the income collected from the mortgages to their shareholders.

Mortgage REITs can pay significantly higher dividends than many other REITs. In the past their dividend yields have reached well into the double digits. Some yields have reached as high as 18%.

Since these are really simple companies, it’s really easy to calculate their fundamental value. All you have to do is take the value of the assets (the mortgages they hold) and subtract their debt and you have their book value.

So valuing the shares is relatively easy and, as a result, determining when to buy them is just as easy. All you have to do is look at their book value per share, or what is a common investment valuation metric called the Price to Book Value (P/B) ratio.

When the P/B ratio is below one, they are selling for less than the value of their assets. When the P/B ratio is above one, they’re selling for more than their value. The time to buy is when the P/B ratio is below one. It’s just that simple.

Right now, the P/B ratios on these stocks has fallen to their lowest level in years. And as a result, mortgage REITs which are still paying double digit yields and are as cheap as they’ve been in years.

best income investments today

The Best Income Investments Are “On Sale” Now

Two of the largest and most widely held mortgage REITs are Annaly Capital Management (NYSE:NLY) and Hatteras Financial (NYSE:HTS).

According to their P/B values, they are the cheapest they’ve been in more than five years.

This chart from ycharts.com shows the historical P/B over the last five years of Annaly Capital Management:

The chart shows the P/B ratio has only dropped below one twice in the past five years. One of the times was when the market was bottoming out in March 2009. The other time is now.

This chart from ycharts.com shows the historical P/B over the last five years of Hatteras Financial is also hitting near record lows:

Hatteras is in the same valuation range as Annaly. They’re both selling at more than 10% discounts to their fundamental net value per share.

Both of these mortgage REITs are exceptionally cheap relative to their fundamental value.

For contrarian investors looking for the few opportunities presented in the current market, these mortgage REITs are out of favor, cheap, and offer the best capital appreciation potential with the lowest risk they’ve had in years.

On top of that Annaly’s dividend yield is 12.3% and Hatteras’ dividend yield is 10.6%.

Investors looking for great value or high yields can find both these leading mortgage REITs.

That rare combination of value and high yield will pay off well in the months and years ahead.

Good investing,

 

Andrew Mickey
Executive Editor, Contrarian Insights

Join Now

The Group of Big Investors in United States.

Your Email

what will the price of gold be in 2015

Like This?

Share This:

Facebook Twitter Share on Google+ Digg Reddit LinkedIn Pinterest StumbleUpon

Recent Post

How to Buy Commodity Stocks Online 2015 - Learn here it’s Safe to Investment in Commodity Market

The how to invest in commodities stock 2015 can correct any fluctuations that investors may have felt recently in their fortunes. The beginning of the year was on a shaky note with the direction of profits not very clear. However, with the months wearing on, the commodities market is once..... Read More...

Is Gold and Silver a Good Investment in 2015? Gold Coins Investment Best Idea for a Great Return

The is investing in gold a good idea right now is the hot conversation for small and big time investors alike. With the crash in real estate markets and the continued disfavor of bonds, gold is the only option which is fast emerging as the fail safe investment. Moreover, gold..... Read More...

Top 10 Best Stocks To Invest In Right Now in 2015, Learn Here How to Buy Stock Now

The top ten best stocks to invest in 2015 can help investors consolidate gains this year with a great margin. These are the stocks one’s would prefer to buy and hold onto for a long time. There are more winners here than losers which sped way past the rest..... Read More...

Best Investment Strategy for High Income Earners, Learn Here Investment Strategies for Buying Stocks

The investment strategies for high income earners are a few of the best special financial tips to help in wealth management. The top 2-3 per cent of the high income earners has a challenging task in holding onto their money and investment may be the only way out to avoid..... Read More...

How to Make Money in the Stock Market with Little Money for beginners, Future Wealth

The how to make money in the stock market with little money is a sure fire way to get out a less than perfect existence. It is a means other catapult in to luxury almost overnight as has been shown by many an investor in all times. Investing in the..... Read More...