ETFs that invest in mortgage REITs are throwing off income of more than 10% but investors need to be aware of the risks before chasing those juicy yields, such as the threat of rising interest rates and the dangers associated with leverage.

The $537.4 million iShares FTSE NAREIT Mortgage Plus Capped Index Fund (NYSEArca: REM) has a 30-day SEC yield of 13.3%, according to sponsor BlackRock.

Meanwhile, the $51.5 million Market Vectors Mortgage REIT Income ETF (NYSEArca: MORT) sports a 30-day SEC yield of 12.2%, according to manager Van Eck.

Real estate investment trusts, or REITs, are companies that distribute most of their profits to shareholders in the form of dividends to qualify for government tax breaks. [ETF Spotlight: Mortgage REITs]

“This ETF’s portfolio is composed of mortgage REITs, which are firms that seek to benefit from the spread between short-term and long-term rates by using very short-term debt such as repurchase agreements to fund purchases of residential and commercial mortgage-backed securities,” says Morningstar’s Patricia Oey in an analyst report on MORT.

The use of leverage boosts the ETFs’ yield but also creates risks.

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