If dividends are certain, why don't everyone invest in stocks that pay dividends? What are the risks?

For instance, IVR pays healthy dividends every quarter. What is stopping the big guns investing heavily in IVR? I am just learning this game, please help me understand.|||Stocks like IVR are a problem for amateur investing because they aren't traditional corporations producing a product or a service and then paying out a dividend from earnings. Hence comments like "Companies that pay high dividends have flat revenue growth" just don't make sense in this context.





IVR is a mortgage REIT (mREIT). REIT's have to pay out at least 90% of their revenue as dividends or they lose their status as REIT's and get taxed at the corporate level (which would destroy them as other REIT's don't pay this tax). Thus, an mREIT can't reinvest dividends into the business and grow the business unlike traditional companies.





The business of mREIT's is to borrow money and buy mortgage backed-securities. The huge dividends that you see are the result of the difference between the REIT's borrowing expenses and the yield on the MBS. There is no trick to this - MBS rely on people's abilities to pay their mortgages and that's suspect right now so yields are high and borrowing costs are really cheap.





The downside is that the mREIT is making a big bet on mortgages. As the mortgage market looks more and more shaky because economic conditions deteriorate, the MBS in their portfolio lose value which is why the stock value has slid so much this year. There is no free lunch. MBS pay high coupons because their credit quality or cash flows are suspect. As there are problems with the securities the value of the stock goes down. Thus you can get a 25% dividend (because as a REIT they have to pay it) and get a 30% decline in the value of the stock which means the dividend didn't help you that much.





There are some questions about IVR in particular that make it offer a very high dividend. If you like mREIT's I recommend the guaranteed ones like AGNC and NLY that seem to be aa little more solid than IVR.





I also think that if you are simply looking at one number about a stock such as dividend yield and thinking you should buy the stock, that you are not yet ready to buy any stocks. Every stock has a story and you need to start by understanding the company's fundamental business model and then deciding if that's something you want to invest in. Before you invest in mREIT's you need to decide if leveraged investing in mortgage backed securities is something you want to do.|||When you see a really big dividend like that, a red flag should immediately pop up. Companies like IVR are extremely risky. Those dividends might not continue at that level and there is even the possibility of the company becoming insolvent. That would mean you would loose your investment. Back in May the stock was selling at 23 a share. Today it is selling at 14. However, I might add that there are certainly some who do think IVR is a terrific buy.|||Dividends aren't certain!. If investors thought the dividend was certain they would buy the stock. Then the price would go up and the dividend yield or return would get lower and lower until they stopped buying.|||Stocks that have dividends usually have flat revenue growth.