Decision Time For High Dividend REIT Names – Add or Bail?

• Posted by Greg Harmon
• on July 26th, 2011

Many have grown wise to the REIT sector as the market has moved in a sideways funk for several months. Now there is discussion that this sector should be avoided because of the dividend risk that potentially rising rates has. I do not know what people see on the horizon that means massively rising rates but I do know what I see in their charts. Let’s take a look at three high fliers, all of which I currently own.

Anworth Asset Mortgage, $ANH

Anworth Asset Mortgage, $ANH, was the first one to report earnings on July 19 so that is out of the way. The stock pays a 13.7% dividend yield and has had a great move from September last year. Notice the price action shows that since the rally started that it has bounced higher off of the area of either the lower Bollinger band or the 100 day Simple Moving Average or both. It is now in that range again and printed a hammer on former resistance, now support at 7.05. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicator both suggest that there may be more down side to come and the 100 day SMA is lower at 6.94. I will look at that area as a decision point for my holding.

American Capital Agency, $AGNC

American Capital Agency, $AGNC, reported earnings after the bell on Tuesday. It finished the day on a big down candle closing on the low, but after reporting was trading back near 29 in after hours trading. This stock has an enormous 19% dividend yield, It also shows the reversals at the Bollinger band or 100 day SMA or both, and finished right there Tuesday. The RSI and MACD are pointing lower in this name also. Same plan here.

Annaly Capital Management, $NLY

Annaly Capital Management, $NLY, reports Wednesday. It has a dividend yield of 14.5%. It printed a doji candle going into earnings at the lower Bollinger band and near the 100 day SMA, areas of importance for it as well. The RSI and MACD are the same for $NLY pointing lower. So the same plan here as well.

Three high dividend names all with the same chart, being impacted by the same market dynamics. Watch them for the confirmation of the reversals and move higher or failure and continue lower. And with dividend dates not coming again until late September lightening the load might be prudent and still have opportunity down the road.

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