Two Harbors Investment Corp (TWO), Simon Property Group, Inc (SPG): Whoa…Heavy Insider Buying

Two insiders at American Capital Mortgage Investment Crp (NASDAQ:MTGE) were buying in February at prices close to $26 per share. This is another company with a high dividend yield, but the stock has only been publicly traded since August 2011 (it is up over 40% from its levels at that time). American Capital Mortgage Investment Crp (NASDAQ:MTGE)’s investments include residential mortgage-backed securities, commercial mortgage loans, and mortgage related derivatives. Brian Jackelow’s Sab Capital Management reported a position of 2.5 million shares as of the end of December (see Jackelow’s stock picks).

Newcastle Investment Corp. (NYSE:NCT), a $2.8 billion market cap diversified real estate investment trust, has also been having insiders increase their stake. Newcastle suspended its dividend payments during the financial crisis; the company has been increasing payments since it resumed the quarterly dividend in mid 2011 but the payments are still well below pre crisis levels. Still, with the stock price down over 50% from the middle of 2007 the dividend yield is 8%. The stock is up 82% in the last year on the strength of the real estate market.

Income investors should not commit too much of their portfolio to REITs, particularly residential focused REITs; while the yields are high, a shock to the housing market might cause financial performance- and, by extension, dividend payments- to decline or even be halted as we saw occur during the financial crisis. If the portfolio is firmly grounded in more established businesses, however, it may be worth the risk to include a small number of higher-yield investments to boost the average dividend yield.

Disclosure: I own no shares of any stocks mentioned in this article.