A 12.1% Yield Backed By “Uncle Sam”

Today’s chart highlights my favorite place to find safe seven percent, nine percent, and even 12% yields: mortgage real estate investment trusts (REITs). Mortgage REITs work like a virtual bank. They borrow money from savers and lend out funds to homeowners. Because “Uncle Sam” backs many of these loans, investors prize these businesses for their safe income.

Case in point: Western Asset Mortgage Capital Corp (NYSE:WMC). This lender invests in residential mortgages with guarantees from federal agencies. And with a payout topping 12%, the stock is worth a second look. Western is a sleepy business, for starters. The mortgage represents the last bill that people skip during a financial crisis. In the unlikely event of a default, the company stands first in line to get paid. Furthermore, most of these loans have the backing of Uncle Sam. To encourage lending, federal agencies like Fannie Mae and Freddie Mac have ensured residential mortgages. This meant that even during the height of the 2008 financial crisis, insured mortgage-holders still got paid.

Source: Income Investors

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