12%-Plus Dividend Yield and Double Digit Upside: Top Analyst Suggests 2 Dividend Stocks to Buy

Income investors have long favored high-yield dividend stocks because they provide a steady stream of generous cash income. At the same time, if the underlying business performs well, investors may also benefit from share-price appreciation, creating an additional source of return.

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For investors seeking that combination of income and upside potential, real estate investment trusts (REITs) remain a sector worth exploring. REITs, which operate through the ownership, management, and leasing of various types of real properties and mortgage investments, receive favorable tax treatment in exchange for distributing a significant portion of their taxable income to shareholders – and dividends are frequently used to comply with those rules.

That brings us to mortgage REITs, or mREITs, which invest primarily in mortgage-related assets rather than physical properties. The group has faced significant headwinds in recent years as higher interest rates and weakness in commercial real estate have weighed on sentiment. However, those same pressures may have created an opportunity. As conditions begin to stabilize and valuations remain depressed, some analysts see the potential for both attractive income and meaningful capital appreciation.

Among them is top BTIG analyst Douglas Harter, who believes the risk-reward setup in select mREITs is becoming compelling.

“The residential credit-focused mREITs offer a more discounted valuation than the Agency-focused, plus more book value upside potential over time. We expect book values to be relatively stable and see the current valuation discount being a result of lower relative ROEs/dividend yields (partially as a result of higher operating costs acting as a drag) vs. concerns with the asset quality,” says Harter, who is ranked among the top 4% of Wall Street analysts.

Against this backdrop, Harter believes two mREIT stocks stand out, offering dividend yields of 12% or better along with at least 10% upside potential. We used the TipRanks database to take a closer look at both.

MFA Financial (MFA)

First on today’s stock radar is MFA Financial, a REIT that works as a specialty finance company, using its access to shareholder capital to invest in a range of real estate assets, including residential mortgage loans and mortgage-backed securities (MBSs). MFA is an internally managed REIT and originates residential mortgage loans through its wholly owned subsidiary, Lima One.

The company has a diverse portfolio of assets, leaning heavily on non-QM loans and Agency MBSs, but also including single-family rental loans and residential transitional loans. In addition, the company’s portfolio still includes various older legacy loans. MFA finished last year with its portfolio valued at $12.3 billion; at the end of 1Q26, this total valuation had grown to $12.5 billion. The non-QM and Agency MBS segments make up $5.5 billion and $3.5 billion of the portfolio, respectively.

In Q1, MFA realized net interest income, on all of its investments, of $59.19 million. This figure missed expectations by $1.85 million, even as it grew by nearly 3% year-over-year. At the bottom line, the company’s results were mixed. MFA’s distributable earnings, a key metric that measures the earnings available to cover the dividend, were reported as $31.1 million, which came to 30 cents per common share. Along with this, the company reported distributable earnings prior to realized credit losses of $35.5 million, or 34 cents per share. We should note here that MFA’s regular cash dividend was last declared at 36 cents per common share.

The last dividend payment was made on April 30, pursuant to the March 5 declaration. The next payment, also of $0.36 per share, was declared on June 11 and is scheduled for July 31. The annualized dividend rate of $1.44 per common share translates to a robust forward yield of 15.4%. However, MFA currently faces a dividend coverage gap, as it is paying out more in dividends than it is generating in distributable earnings.

BTIG’s Harter acknowledges that MFA has recently under-earned its dividend from a distributable earnings perspective. However, he views the shortfall as temporary, arguing that the resolution of legacy residential transition loans should improve earnings and allow the dividend to be fully covered by the end of 2026.

“MFA has under-earned its dividend from a DE perspective over the past 5 quarters given the drag from the legacy residential transition loans (both realized losses and unproductive capital). The realized losses are likely to accelerate in 2Q as loan resolutions accelerate before moderating. While the realized losses hit DE they are noneconomic as the assets have already impacted book value through mark to market. Resolving the loans and redeploying the capital should allow for DE to improve and cover the dividend by the end of 2026. Along these lines MFA introduced DE excluding losses last quarter (similar to the way commercial mREITs report) to show the underlying earnings power of the portfolio,” Harter noted.

Quantifying his stance, Harter puts a Buy rating on MFA shares, and his $10.50 price target implies a one-year upside potential of 10%. Add in the dividend yield, and the total one-year return here can reach about 25%. (To watch Harter’s track record, click here)

Overall, there are currently 4 analyst ratings on record for MFA, and the even split of Buy vs. Hold gives the stock its Moderate Buy consensus rating. The shares are currently trading for $9.53 and have an average target price of $10.50, matching the BTIG view. (See MFA stock forecast)