Dividends4Life: Currently Offering a Dividend Yield of 10.57%

To remove the doubt from unpredictable capital gain, investors should consider dividend-paying stocks. These investments pay out income on a regular basis, so more time in the investment means more money paid out. The total return also factors in both the income and capital gain. One reason a company has a dividend is to attract long-term shareholders, creating the highest value possible, which takes time. This usually entails the stock having lower volatility and greater preservation of capital. And of course, they can only afford to pay a dividend if cash flow holds steady...

That established, let’s now take a look at a company that pays a high dividend yield and offers an additional return via stock price appreciation. I’m talking about Two Harbors Investment Corp (NYSE:TWO). Two Harbors finances and manages residential mortgage-backed securities (RMBS), mortgage servicing rights, and commercial real estate assets. Investors are biased towards agency RMBSs, which are investments backed by the government, since they offer lower risk. Two Harbors is a real estate investment trust (REIT), which comes with benefits such as tax breaks. In return, 75% of the company’s capital must be invested in real-estate-related assets, and 90% of its cash flow must be put toward the dividend. This high allocation helps keep management in line, controlling spending.

Source: Income Investors

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