The Dividend Daily

Redwood Trust (RWT) got clocked today on volume over three times their daily average. The California REIT company invests in residential and commercial real estate loans, and in asset-backed securities backed by real estate loans. RWT's dividend yield now stands at an eye-popping 13%, but dividend investors should take heed -- this stock may be a "dividend trap" in the making. Recently, Redwood Trust's competitors Thornburg Mortgage and New Century Financial (both now essentially defunct) taught investors a lesson about what could happen to companies whose solid reputations were destroyed by the subprime crisis. However, we're not so sure Redwood will follow down the same path as those failed lenders, and apparently neither does CEO George Bell -- he spent more than half a million dollars to acquire shares of Redwood Trust while it was trading in the low-to-mid $30s back in March. But for now, dividend investors would be better advised staying out of the way of this falling REIT. Redwood Trust (RWT) is not recommended at this time, and currently holds a Dividend.com rating of 3.1 out of 5 stars. Be sure to visit our complete recommended list of the Best Dividend Stocks as well as a detailed explanation of our ratings system here.

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