O - 2 Ultra-High-Yield Financial Stocks To Buy Hand Over Fist and 1 To Avoid
2024-01-25 06:44:00 ET
There is no such thing as a perfect investment -- all stocks come with trade-offs. But some trade-offs are just too extreme to bother with.
Many ultra-high-yield dividend stocks fall into this category. Contrary to the safe-and-steady image you may have of passive income investments, an unusually high yield can be a warning sign. That's the story behind Annaly Capital (NYSE: NLY) and its gargantuan 13.5% dividend yield. Most dividend investors should avoid it, and for very good reasons. But for Bank of Nova Scotia (NYSE: BNS) and Realty Income (NYSE: O) , the story couldn't be more different. Here's what you need to know about these three ultra-high-yield stocks.
Before explaining why Annaly isn't a great dividend stock, it should be noted that it isn't really designed to be owned by dividend investors. The company is meant to be plugged into an asset allocation model, providing large investors like insurance companies with direct exposure to mortgage securities . It's just that, for tax reasons, Annaly is structured as a real estate investment trust (REIT), so it pays out most of its earnings as dividends.
For further details see:
2 Ultra-High-Yield Financial Stocks To Buy Hand Over Fist and 1 To Avoid