These 3 Stocks Pay Dividends of Up to 17% a Year. But Only One Will Make You Money
Three REITs promise 5.8% to 17.1% a year, and all claim they earn enough to cover their dividends. But two of them burned through 11% to 17% of their book value in a single quarter. Which yield is paid from earnings, and which from investors’ capital?
Key points
Three REITs offer 5.8% to 17.1% a year, and each funds its payout from a completely different source.
Two of these companies burned through 11% to 17% of their book value per share in a single quarter.
One of the stocks trades 24% above the value of the assets behind it.
A 196% payout ratio at one of the companies means something different from what most investors read on a stock screener.
Three earnings dates between November and January will show which yield is paid from earnings and which from shareholders’ capital.
Three dividends, three different sources of money
Dividend yields of 17.1%, 15.8%, and 5.8%. Numbers that light up green on every stock screener. But right next to them are other figures: -27.5%, -25.2%, and -11.8% from their 52-week highs. AGNC Investment $AGNC , Annaly Capital Management $NLY and Omega Healthcare Investors $OHI all fall into the same category of high-payout REITs, yet each covers its yield from a different source.
Stock | Price | From 52-week high | Dividend yield | Book value per share | Price / book value |
|---|---|---|---|---|---|
AGNC | 8,84 USD | -27,5 % | 17,1 % | 7,13 USD | 1,24x |
NLY | 18,35 USD | -25,2 % | 15,8 % | 17,86 USD | 1,03x |
OHI | 46,23 USD | -11,8 % | 5,8 % | n.a. | n.a. |
The key to the first two rows is simple. AGNC and Annaly don’t own buildings; they own mortgage bonds bought with borrowed money. Imagine buying $100 worth of bonds, $88 of it on credit. The difference between the interest on the bonds and the cost of the loan comes in every month—that’s the “earned” dividend. But bonds are repriced every day, and if their price falls by 2%, your own invested money falls by 17%. That’s exactly what happened in the third quarter.
“Fixed-income markets faced significant pressure in the third quarter, particularly in the final weeks of September, when bond investor sentiment turned decisively bearish, interest rates rose sharply, and rate volatility spiked.”
Peter Federico, President, CEO and Chief Investment Officer of AGNC Investment
AGNC: 17% a year and a 24% premium for assets that just shrank
Third-quarter results, reported on October 19, tell two stories. Net spread income reached 0,37 USD per share, while the quarterly dividend was 0,36 USD. But the comprehensive loss was 1,28 USD per share, and tangible book value fell by 1,45 USD, or 16,9 %, to 7,13 USD. The economic return for the quarter: -12,7 %. A shareholder received 36 cents and at the same time lost 1,45 dollars in the value of their stake. Leverage rose to 7,9x.
And now for the part few people notice. At 8,84 USD, the stock costs 24% more than the book value of the assets you get for it. The company is actively taking advantage of that premium: in the third quarter, it issued 97,6 million new shares through its ATM program for 992 million USD, or about 10,2 USD per share. New investors thus paid more than a dollar for every dollar of assets, which also means that some of the capital funding the payout came from incoming shareholders, not mortgage bonds.
Since the start of the year, the share price is down -17,5 %, while the 12-month dividend is 1,44 USD. So far, the dividend has only plugged the hole in the share price. The conference call offered some comfort: according to Federico, tangible book value was up 3% as of October 16, and spreads on agency MBS versus Treasuries ended at around 135 basis points, near the upper end of their multi-year range.
Annaly: a 196% payout ratio that isn’t what it seems
Annaly’s stock screener shows a payout ratio of 196%, suggesting that the company pays out twice what it earns. That figure is calculated from GAAP earnings, which fluctuate with every portfolio revaluation at mortgage REITs. For the third quarter, Annaly reported a GAAP loss of 1,36 USD per share, but earnings available for distribution (EAD) of 0,80 USD against a dividend of 0,75 USD. EAD shows how much came in from net interest spreads; GAAP shows how much of the asset value evaporated in the meantime.
Book value per share fell from 20,15 to 17,86 USD, down 11,4 %, the economic return was -7,6 %, and economic leverage rose from 5,6x to 5,9x. Annaly also raised 757 million USD through its ATM program. But there are two important differences from AGNC. The loss in value was roughly half as large, because only 55% of its capital is invested in agency MBS, 23% in residential loans, and 22% in mortgage servicing rights (MSR), which tend to gain value when rates rise. And the price of 18,35 USD is only 3% above book value. Those buying Annaly pay about a dollar and three cents for every dollar of assets. With AGNC, it’s a dollar twenty-four.
“Annaly meanwhile generated earnings available for distribution of 0,80 dollars per share, once again exceeding the common stock dividend, underscoring the sustained earnings power of our platform.”
David Finkelstein, CEO and Co-Chief Investment Officer of Annaly Capital Management
Omega: the only one where the dividend comes on top, not instead
Omega is the only one of the three to have also made money on its share price over the past year: +14,2 %, plus a 5,8 % yield. It owns nursing homes in the U.S. and the U.K. and leases them to operators on long-term contracts. A lease isn’t repriced every day like a mortgage bond, so the value of the assets doesn’t fluctuate with bond market sentiment. The risk lies elsewhere: with tenants, their occupancy rates, and the rates Medicaid pays them.
In the second quarter, revenue rose 15,9 % to 328 million USD, and adjusted funds from operations (AFFO) reached 0,83 USD per share, compared with the dividend, which the company raised to 0,68 USD in August. It raised its full-year AFFO guidance to 3,22 to 3,26 USD, despite selling 563 million USD in assets and making just 126 million in new investments. Portfolio occupancy stands at 82,6 %, and CEO Taylor Pickett called nursing homes resilient and reliable assets on the call.
The catch is the price. A P/E of 16,3 is below the five-year average of 22,7, but Bulios’s fair value of 38,12 USD is 17,5 % below the current price, and the analyst consensus of 49,88 USD leaves only about 8% upside. The unexciting 5,8 % yield comes on top of a rising share price, but at a valuation that already reflects much of the good news. A 95% payout ratio based on net income looks tight; against AFFO, it’s about 82%.
What will matter: three dates and two signals
The next test is coming soon:
3. 11. 2026 - Omega, third quarter (estimated EPS 0,47 USD). Watch AFFO against the 0,68 USD dividend and occupancy: if AFFO stays above 0,80 USD, the 5,8 % yield is covered.
25. 1. 2027 - AGNC, fourth quarter (estimated EPS 0,38 USD). Tangible book value is what matters: stabilization above 7 USD would mean the 0,36 USD dividend is finally coming on top of value, not instead of it.
27. 1. 2027 - Annaly, fourth quarter (estimated EPS 0,78 USD, date unconfirmed). Watch EAD against the 0,75 USD dividend and leverage, which has already risen to 5,9x.
Mortgage REITs face two scenarios. If agency MBS spreads narrow from the upper end of their range and rate volatility subsides, book value rises and a 16% to 17% dividend becomes a genuine additional return. If bond market jitters persist, book value continues to erode and the dividend merely slows the loss. In that second scenario, AGNC is more vulnerable: its 24% premium to book value could disappear even if the dividend remains unchanged, leaving room for the stock to fall without any change in the payout. Annaly, with a premium of just 3%, has no such cushion to lose.
Omega’s risk is the mirror image. Its dividend is covered and the share price is rising, but every dollar above fair value is a bet that tenants will keep paying and occupancy won’t fall. A drop in AFFO below the dividend or news of a troubled tenant would be a warning sign. Until then, Omega remains the only one of the three where the dividend doesn’t plug a hole in the share price, but comes on top of earnings.
