2024-07-28 03:57:00 ET
When it comes to investing, hope tends to spring eternal. That's why investors continue to buy companies that are bad investments, even when it is pretty clear that this is the case. The meme-stock mania is a good example of this self-destructive habit. For income investors, a better reference point for this mistake would be buying an ultra-high-yield stock despite a history of dividend cuts.
That's exactly the problem with Annaly Capital (NYSE: NLY) , AGNC Investment (NASDAQ: AGNC) , and Two Harbors Investment (NYSE: TWO) . Here's why dividend investors shouldn't chase these ultra-high yields today.
Annaly Capital, AGNC Investment, and Two Harbors are all real estate investment trusts (REITs). In and of itself, that's not a bad thing, given that REITs were specifically created to allow small investors access to institutional-level real estate investments. REITs receive special tax treatment, avoiding corporate-level taxation if they distribute at least 90% of their taxable income to shareholders (shareholders have to treat dividends as regular income). So, generally speaking, REITs tend to have high yields.
For further details see:
Don't Fall for These 3 Dividend Stocks: Cuts Are Coming