The Best Deals in Flint Michigan

This might sound odd, but I’m suspicious of high dividend yields…

Being a professional dividend stock analyst, I frequently examine the stock market for high-yield dividend stocks. My searches mostly create hundreds of results. Currently, for instance, 95 stocks are yielding above 10%.

These dividend yields seem amazing until I check out the businesses behind them. However they are generally rubbish. The high yield means the stock value has in recent times dropped or the dividend payment is just about to drop… or both.

In other words, I in general think about high dividend yields the similar way I would treat a colorful snake: I steer clear.

That said, there are all the time exceptions to the rule. Through the years, I have been able to discover pockets of rock-solid high-yield stocks dumped in garbage. In recent times, I discovered one of those “pockets” in mortgage industry…

You will find two different forms of mortgages.
1. Agency Mortgages: The mortgages insured by government.
2. Nonagency Mortgages: These mortgages would not have government back up and they are issued by private lenders like banks or mortgage companies.

In past three years, investors who invested their money in nonagency mortgages have lost trillions of dollars. The recession has created it much hard for the property owners to make their monthly mortgage repayments. Non-Payment, delinquencies as well as foreclosures have increased like anything. The investors who invested their money in these mortgages have lost their fortunes since there is no security from a government guarantee.

Mortgages have created big losses for the people who invested them in the last 10 years.  They’re the final investment option that you would think buying if you are planning for investment. I’ll be of a similar opinion with you, and leave them with the rest of the useless items my screens turn up.

Typically, I’d have the same opinion with you. However take a look at this for a while.

TransUnion is a 3rd largest consumer credit reporting bureau in the United States, which offers credit-related information to potential creditors. Every month, TransUnion measures the number of mortgages which have gone 60 days or more without the borrower making a payment.

According to the most recent research report from TransUnion, the 60-day failure rate for all mortgages dropped this month for the first time in last 3 years, from 6.89% to 6.77%.

Among the ground rules of earning money in the stock market is to buy while things go from bad to less bad. And that’s what happening in the mortgage market right now. A lesser amount of people are defaulting on their loans for the first time.

The market is turning around. It’s a excellent chance to purchase nonagency mortgages, even if they stink.

Mortgage Real Estate Investment Trusts (REIT) are stock market instruments that focus in investing in mortgages. Nonagency mortgages remain transacting, on average, approximately seventy cents on the dollar. The handful of mortgage REITs that make investments in nonagency mortgages are transacting like junk bonds and paying 12%-18% dividends.

As lesser quantity homeowners failure to pay on their mortgages, mortgage REITs should be able to make more profits and pay bigger dividends. As other investors understand mortgage REIT dividends are sustainable, they’re going to push up the stock prices, providing you with capital gains, too.

In short, the mortgage market is moving from “bad” to “less bad” and it is giving us a unusual opportunity to receive a secure, high profits stream from the mortgage REIT industry.

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