Hi yield mortgage bond funds use debt (often tons of debt) and preferred stock to leverage their portfolio of mortgage securities. That lifts the payout but it also increases risk if mortgage rates rise or credit worthiness falls as it did in the Great Recession when many mREITs collapsed. Some mREITS claim to use hedging techniques.
By and large, mREITs have been poor investments in recent decades compared with a diversified portfolio of blue chips or an S&P 500 index fund.
Who buys these? Often unsophisticated retirees desperate for income. Wealthy investors don't care about monthly dividends. Any dividend above about 8% is a huge red flag for problems. I shun monthly pay stocks.
Beware sucker yields and div gimmicks. Many things can go wrong with these.
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