NEW YORK (TheStreet) -- Investors who had exposure to the real estate market in 2008 got hammered. With the body count still fresh in their minds, investments connected to the real estate market may seem needlessly risky. However, the crash also created a lot of opportunities.
While it might not be a good idea to buy an apartment complex as an investment property, investing in a real estate investment management firm could give investors exposure to the market in a professionally managed, diversified vehicle.
, for example, offers exposure to real estate without the uncertainty of specific property investments. Also, as an added incentive to investors, Chimera offers a fat dividend yield of 18% and the company seems committed to maintaining a solid dividend payout even during times of weak performance.
Chimera Investment's Big Dividend Yield
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Stocks with high dividend yields are often not as attractive as one might think. The dividend might be artificially high because of a massive share price decline, which makes the payout ratio unlikely to stay high. Those companies are likely to halt their dividends and restore payouts slowly when business improves.
That's not the case with Chimera. After the crash, the company slashed its dividend before raising it to comply with regulations requiring real estate investment trusts (REITs) to distribute 90% of their net income to keep their tax benefits.
The fact that the dividend follows the performance of the company lets investors share in the success or failure of the business. Because of that, this investment should closely track real estate in general. With prices dropping by double-digit percentages in many places, bargains are plentiful and Chimera could benefit.
Compared with other REITs, Chimera's stock is cheap based on almost every metric. The shares carry a PEG ratio of 0.64 and are trading at low multiples of earnings, book value, sales and free cash flow.
Exposure to real estate doesn't need to come in huge illiquid properties that eat up your portfolio. Considers REITs like Chimera to diversify and create a steady stream of income.
-- Reported by David MacDougall in Boston.
Prior to joining TheStreet Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.