Quite a few REITs (Real Estate Invesment Trusts) have made their way onto the Zacks Rank #1 (Strong Buy) list with several standing out in terms of affordability.

Trading under $20 a share, these REIT stocks have annual dividend yields over 10% which may certainly peak investors' interest.  

MFA Financial

At $12, MFA Financials’ MFA stock currently has a 10.96% annual dividend yield. More intriguing is that MFA trades at just 7.8X forward earnings with the company’s focus being on mortgage-backed securities.

Justifying that MFA may indeed be cheap based on its stock price and P/E valuation is that annual earnings are expected to be virtually flat this year but projected to rise 1% in fiscal 2025 to $1.62 per share. Plus, earnings estimate revisions for FY24 and FY25 are up 5% in the last 60 days.

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NexPoint Real Estate

Positive earnings estimate revisions have been compelling for NexPoint Real Estate NREF as well which originates, structures, and invests in first mortgage loans, mezzanine loans, and structured financings in commercial real estate properties.

At $15 a share, NREF is at a 12.5X forward earnings multiple with EPS projected to be down -34% in FY24 but expected to rebound and soar 72% in FY25 to $2.08. Even better, FY24 EPS estimates have spiked 18% in the last two months with FY25 EPS estimates up 2%.

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Furthermore, NexPoint’s dividend is at 13.2% which even tops its Zacks REIT and Equity Trust Industry average of 11.42% and obliterates the S&P 500’s 1.24% average.

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Two Harbors Investments

While Two Harbors Investments TWO forward P/E valuation of 30.1X is not cheap, earnings estiamtes have skyrocketed.

With its stock trading at $13, Two Harbors manages residential mortgage-backed securities and is now expected to post a suprise profit of $0.46 per share in FY24 compared to estimates that called for an adjusted loss of -$0.60 a share 60 days ago.

Better still, FY25 EPS estimates have soared to $0.83 from expectations of a loss of -$0.65 a share two months ago. Two Harbors' 13.12% annual dividend yield should certainly keep investors engaged given the company’s strengthening outlook.

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Bottom Line

The Fed’s decision to cut rates should improve the operations for many financial sector companies and the trend of positive earnings estimate revisions is very appealing for these domestic REITs. This strongly suggests more upside and makes now an ideal time to buy considering their enticing dividends.  

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Two Harbors Investments Corp (TWO) : Free Stock Analysis Report

MFA Financial, Inc. (MFA) : Free Stock Analysis Report

NexPoint Real Estate Finance, Inc. (NREF) : Free Stock Analysis Report

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