Big Yields, and Getting Bigger - Capstead Mortgage (CMO)

Seeing a dividend yield of 15.7% is unusual. Seeing a dividend yield of 15.7% that the company can actually afford to pay is almost unheard of. That's what makes Capstead Mortgage Corp. (CMO) such a curious idea.... the payout is actually reliable now that the mortgage industry is pulling itself out of the credit market's dregs.

Though many - perhaps most - REITS are still a question mark thanks to shaky qualities in the underlying investments, Capstead Mortgage Corp. found that boring can be beautiful too. How so? The company only deals in government-backed loans.

Though that safety penchant didn't prevent the dividend from being whittled away to near nothing between 2005 and 2007, the credit market's demise ended up being CMO owners' gain. Moreover, while the real estate and mortgage markets continue to improve, Capstead's yield should ramp up nicely to an even greater degree. In fact, it already is.

This may be an aggressive but effective way to maintain income while avoiding bonds; bonds can only lose value (not to mention locking in low interest yields) as interest rates go up.... and interest rates can only go up from here.