NRZ - Broadmark Realty Capital Is a REIT You Should Know
Mortgage real estate investment trusts (REITs) are, generally speaking, high-risk dividend stocks. The really big issue is the leverage that is employed, which can amplify returns when times are good but also amplify losses when times aren't good. Broadmark Realty Capital (NYSE: BRMK) upends that model, focusing on hard money lending and a debt-light balance sheet. Here's what that means and why dividend investors should prefer Broadmark over other mortgage REITs.
Normally a mortgage real estate investment trust buys mortgage securities that have been pooled together into bond-like securities called collateralized mortgage obligations (CMOs). That, in and of itself, isn't a big deal. The real problem arises because those mortgage securities are often used as collateral for loans, with the additional cash used to buy more CMOs. That leverage is a huge benefit when times are good, because it allows mortgage REITs to amplify their returns.
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