3 Financial Stocks With Huge Dividends for Weak Growth

NEW YORK (TheStreet) --Mortgage REITs have posted strong gains in recent weeks amid what has otherwise been a sharp selloff in financial stocks.

Over the past month, Market Vectors Mortgage REIT Income ETF(MORT) has risen 4.05% while the Financial Select Sector SPDR(XLF) has fallen by 2.48%. Throw in a double digit annual dividend yield for MORT (it was 12.80% as of the end of March) and mortgage REITs' outperformance is even more marked.

Mortgage REITs are investment vehicles that borrow short and lend long, enhancing returns through the use of leverage. They pay out 90% of their income in dividends.

RBC Capital Markets Jason Arnold attributes the mortgage REIT rally to a weaker macroeconomic outlook and a recent flight to 10-year Treasuries which typically causes book values of Mortgage REITs to move higher.

The weaker economic outlook also "reinforces the idea that rates really will stay low as long as Federal Reserve Chairman Ben Bernanke is suggesting they'll stay low. That in turn bodes really well for the return profiles of these businesses," Arnold says.