3 REITs With Great Dividends

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( InvestorPlace) -- The housing market is battered, to say the least. Many investors wouldn't even dream of getting into real estate right now -- no matter how low interest rates go or how far home prices already have fallen from the days before the financial crisis.

But if you're one of those folks who thinks that housing has nothing to offer, think again. Your best dividend investment right now could be in the real estate market.

No, I'm not talking about buying a home and making it a rental. (Though admittedly, I truly think that the best investment to buy right now is a house, depending on your situation.) I'm talking about investing in Real Estate Investment Trusts -- dividend powerhouses that by law must deliver 90% of their taxable income back to shareholders.

If you can't stomach the idea of buying a home, take a look at these three REITs that offer fantastic dividend yields right now -- and the prospect of share appreciation to boot:

Annaly Capital: Segment: mortgage loans; market cap: $15.3 billion; dividend yield: 15%

You're taking the tiger by the tail with this stock right now. Annaly Capital ( NLY) shares took a hit earlier this week on fears that broader trouble in the financial sector will infect even cash-rich REITs and on rumors that troubled European lenders also could have a connection to these mortgage investment firms.

But the stock has gained back much of this ground, and rock-bottom long-term rates thanks to the Fed's "Operation Twist" allow Annaly access to super-cheap capital to fund its mortgage business.

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Annaly is the biggest and most liquid player in the mortgage REIT space, with a long history and great fundamentals. Its revenue is above pre-recession levels and it has been profitable in every fiscal year across the financial crisis.

Although its dividend can fluctuate fairly significantly from quarter to quarter, the payouts always equate to a huge yield -- currently just over 15%! And consider this: The lowest dividend in the past five quarters was 60 cents per share, and NLY has a 52-week high of $18.79. Doing the math on the lowest dividend and highest share price in the past year, you "only" get a 12.8% yield. Most investors will take that worst-case scenario to the bank every time.

Senior Housing Properties Trust: Segment: senior housing; market cap: $3.3 billion; dividend yield: 7%

I recently highlighted the big profit potential of the senior housing market because of obvious demographic trends of an aging baby boomer population. Since then, the market contraction and a recent dividend increase has made Senior Housing Properties Trust ( SNH) even more attractive.

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This REIT owns and operates 220 senior living properties in the U.S. and has seen revenue jump from $188 million in fiscal 2007 to a projected $450 million in fiscal 2011 -- a 140% increase in four years.

Thanks to strong numbers, it just increased its dividend this week from 37 cents per share to 38 cents quarterly, giving this dividend stock a plump 7% yield. Don't be scared of the small-cap size -- SNH has paid dividends since 1999 and maintains a steady payout level. Throw in the prospect of an aging population boosting demand over the next few years and you have quite a strong buy.

MDC Holdings: Segment: home builder; market cap: $780 million; dividend yield: 6.4%

MDC Holdings ( MDC) builds and sells homes under the name Richmond American Homes and operates a host of related title and mortgage companies. I know what you're thinking -- who in the heck would buy a home builder right now? Bargain hunters, that's who.

Yes, MDC has $1.2 billion in debt and $1.4 in liabilities -- but it has $2.4 billion in assets and more than $700 million in cash lying around. This company is not going bankrupt any time soon.

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The company's dividend also is not something to worry about, having been paid since 1994. Yes, the stock has tanked 40% so far this year as earnings and revenue have gone in the toilet.

But think of it this way: If shares flatline for five years but the dividend is maintained, you'll get a 6.4% return on your investment. And if in five years' time the housing market is looking a bit perkier, you also could see a profit on MDC shares because you bought at the lowest price for this stock since 2001.

Jeff Reeves is the editor of InvestorPlace.com. Write him at editor@investorplace.com. As of this writing, he does not own a position in any of the stocks in this article. Follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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