ET - Forget This 8.8%-Yielding Dividend Stock. Consider These Even Higher-Yielding Payouts Instead.
2024-01-04 06:20:00 ET
Redwood Trust (NYSE: RWT) pays a pretty enticing dividend. The mortgage-focused real estate investment trust (REIT) currently yields 8.8%. That's several times above the S&P 500 's 1.5% dividend yield.
However, as alluring as the mortgage REIT 's yield might seem, investors should forget about that big-time payout. That's because they can earn even higher yields from Energy Transfer (NYSE: ET) and MPLX (NYSE: MPLX) . The energy master limited partnerships (MLPs) currently yield over 9%. Further, those MLPs are more likely to increase their already high-yielding distributions in the future, which isn't something investors can count on Redwood doing.
Redwood Trust is a mortgage REIT focused on investing in loans for single-family and rental properties. It specializes in jumbo loans used to finance properties that are too expensive for a conventional conforming loan ($766,500 in most counties for 2024). It also engages in business-purpose lending by providing investors with rental property loans. While these are smaller niches than conventional mortgage loans, they're still very large market opportunities. Further, these markets can be very profitable (Redwood can earn a double-digit return on its assets using leverage).
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Forget This 8.8%-Yielding Dividend Stock. Consider These Even Higher-Yielding Payouts Instead.