mREITs, what's your opinion?

[nun]

People are always looking for return and mortgage REITS definitely fit that bill with dividends greater than 10%. However, I'm always dubious about any investment with such a large return as I figure it must go along with lots of risk and obviously the risk with mREITs is all the borrowing used to generate the dividends. So do you have to be a market timer to even consider them? or just a gambler?

 

[jimnjana]

People are always looking for return and mortgage REITS definitely fit that bill with dividends greater than 10%. However, I'm always dubious about any investment with such a large return as I figure it must go along with lots of risk and obviously the risk with mREITs is all the borrowing used to generate the dividends. So do you have to be a market timer to even consider them? or just a gambler?

you do need to do some homework on how mreits make money. I have several, I do not reinvest dividends. MREITS raise funds to buy investments by selling more shares, typically they sell more shares when the share price is at least 4% or so more than book value. I like to add positions after a share offering because typically the market price drops a bit lower than the share offering price. I like MREITS and Business Development Companies BDCs for a small portion of my portfolio. Its not so much market timing as understanding the buying and selling opportunities that MREITs offer by their very nature.

 

[nun]

you do need to do some homework on how mreits make money. I have several, I do not reinvest dividends. MREITS raise funds to buy investments by selling more shares, typically they sell more shares when the share price is at least 4% or so more than book value. I like to add positions after a share offering because typically the market price drops a bit lower than the share offering price. I like MREITS and Business Development Companies BDCs for a small portion of my portfolio. Its not so much market timing as understanding the buying and selling opportunities that MREITs offer by their very nature.

In today's interest rate environment mREITs have nice rate spreads, but I was wondering how people feel with the 5 or 6 times leverage they use to multiply the spread and pay those dividends.

 

[jimnjana]

In today's interest rate environment mREITs have nice rate spreads, but I was wondering how people feel with the 5 or 6 times leverage they use to multiply the spread and pay those dividends.

That is one of the reasons they usually trade under book value.