10 Top-Ranked High-Yield REITs

BOSTON (TheStreet) -- Heightened speculation that the Federal Reserve may keep interest rates low for a longer period confirms its commitment to safeguard the economy.

Real estate investment trusts, or REITs, thrive when interest rates are low because their borrowing costs remain cheap. REITs are required to distribute the vast majority of their income to shareholders, so they offer ample quarterly distributions and lofty yields. Some forecasters expect a near-zero federal funds rate until 2012, making REITs attractive investments. Here are 10 top-ranked high-yield REITs.

10. Simon Property Group ( SPG) owns retail properties, including shopping malls. Simon swung to a second-quarter profit of $152 million, or 52 cents a share, from a year-earlier loss. Revenue grew 3.9%. The operating margin extended from 25% to 45%. Simon's stock trades at a forward earnings multiple of 38, a 35% discount to the REIT industry average. It's expensive based on book value and sales per share. Two thirds of analysts rate the stock "buy."

9. Federal Realty Investment Trust ( FRT) develops, owns and redevelops retail and mixed-use properties. Second-quarter profit increased 9.5% to $31 million, or 49 cents a share, as revenue inched up 2.3%. The operating margin tightened from 43% to 42%. Federal Realty's stock sells for a forward earnings multiple of 39, a 33% discount to the industry average. It's costly based on book value and cash flow. Around 63% of researchers rate it "buy."

8. Health Care REIT ( HCN) owns skilled-nursing and assisted-living facilities. Second-quarter profit contracted 21% to $51 million, or 34 cents a share, as revenue rose 18%. The operating margin narrowed from 57% to 56%. Health Care REIT's stock trades at a forward earnings multiple of 30, a book value multiple of 1.6 and a cash flow multiple of 16 -- 49%, 33% and 10% discounts to peer averages. Roughly 63% of analysts advise purchasing the REIT.

7. Redwood Trust ( RWT) invests in residential and commercial real estate securities. Second-quarter net income more than quadrupled to $29 million and earnings per share more than tripled to 35 cents. Revenue fell 24%. The operating margin increased from 66% to 73%. Redwood's stock sells for a forward earnings multiple of 10 and a book value multiple of 1.2 -- 82% and 51% discounts to peer averages. All of the analysts covering Redwood rate it "buy."

6. MFA Financial ( MFA) invests in mortgage-backed securities. Second-quarter net income tumbled 30% to $48 million and earnings per share fell 46% to 16 cents, hurt by a larger float. Revenue fell 37%. The operating margin dropped from 95% to 92%. MFA's stock trades at a forward earnings multiple of 7.7, a book value multiple of 1 and a cash flow multiple of 8.9 -- 87%, 60% and 50% discounts to peer averages. Roughly 62% of analysts rank the REIT "buy."

5. Capstead Mortgage ( CMO) is a mortgage REIT, focusing on agency-backed paper. Second-quarter profit decreased 30% to $30 million, or 35 cents a share, as revenue fell 41%. The operating margin fell from 95% to 90%. Capstead's stock sells for a forward earnings multiple of 7.1, a book value multiple of 0.8 and a cash flow multiple of 4 -- 88%, 68% and 77% discounts to REIT averages. Around 50% of researchers advocate purchasing the shares.

4. Anworth Mortgage ( ANH) invests in residential mortgage-backed securities. Second-quarter profit decreased 24% to $26 million, or 21 cents a share, as revenue contracted 19%. The operating margin remained steady at 94%. Anworth's stock trades at a forward earnings multiple of 7, a book value multiple of 0.9 and a cash flow multiple of 3.6 -- 88%, 62% and 80% discounts to industry averages. Roughly 83% of analysts recommend purchasing the REIT.

3. Hatteras Financial ( HTS) is a mortgage REIT. Second-quarter profit fell 15% to $37 million, or $1.01 a share, as revenue declined 10%. The operating margin narrowed from 96% to 95%. Hatteras shares sell for a forward earnings multiple of 6.8, a book value multiple of 1.2 and a cash flow multiple of 5.4 -- 88%, 51% and 70% discounts to industry averages. Around 57% of analysts rate Hatteras Financial "buy" and the remainder rank the REIT "hold."

2. Cypress Sharpridge Investments ( CYS) invests in agency-backed mortgage securities. Second-quarter net income increased 34% to $28 million. Earnings per share advanced 20% to $1.46. Revenue nearly doubled. The operating margin rose to 88%. The stock trades at a trailing earnings multiple of 3.9, a forward earnings multiple of 5.7 and a book value multiple of 1.1 -- 94%, 80% and 55% discounts to peer averages. Roughly 88% of analysts rate it "buy."

1. Chimera Investment ( CIM) purchases mortgage and asset-backed securities. Second-quarter net income more than doubled to $125 million. Earnings per share soared 60%. Revenue nearly tripled. The operating margin climbed from 88% to 94%. The stock sells for a forward earnings multiple of 5.4, a book value multiple of 1.3 and a cash flow multiple of 11 -- 91%, 47% and 37% discounts to REIT averages. Around 70% of researchers rank it "buy."

-- Written by Jake Lynch in Boston.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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