The yields currently offered by REITs that invest in mortgage backed securities have been providing impressive, and in some cases double digit dividend yields. MFA Financial (MFA) provides a 12.5% yield while Two Harbors (TWO) provides a 15.7% yield. American Capital Agency (AGNC) provides a 15.4% yield. Chimera (CIM) currently yields 16%. In looking at these numbers, investors might wonder why they bother trying to make gains on any other stocks and just sit and collect over 10% from investments in the common stock of these REITs.

Chimera’s portfolio is managed by Fixed Income Advisory Discount Company which is owned by Annaly Capital (NLY), another high yielding REIT with a dividend yield of over 13%. FIDAC is a fixed income investment management company that focuses on managing credit, interest rate and fixed income securities. Unlike Annaly, Chimera trades both Agency guaranteed and private mortgage paper which is not guaranteed. Chimera also differs from Annaly in that it holds some commercial mortgage paper in its portfolio. Chimera’s stock price is more vulnerable to changes in the economy, good or bad.

Here’s the good news, Chimera has a slight advantage being a hybrid REIT in that it can move between Agency and non-Agency securities to maximize yield in the portfolio. Investors interested in dividends may prefer a diversified REIT as there is some uncertainty in the interest rate climate.

There is some speculation that long term rates could fall below 1%. According to the Chairman of the Federal Reserve, Ben Bernanke, it is possible that the premium on long term interest rates has fallen.To continue reading, click here.