Members Mailbag—Mortgage REITs: In this quick note, we share updated data on 40+ big-yield mortgage REITs, plus a response to a member inquiry about how we are currently rating mREITs in our High Income NOW portfolio. For starters, here is the member inquiry we received:
40 Big-Dividend Mortgage REITs: Terrible YTD as Spreads Widen, Rates Rise, Fed Unwinds, Housing Risks
In theory, Mortgage REITs (or mREITs) do well when interest rates rise, but so far this year they have done poorly because MBS spreads have risen sharply (an indication of risk). Here is a look at 40 big-dividend mREITs, plus some insights on what is happening to their share prices (mainly courtesy of the Fed’s balance sheet), and then a few mREIT investment ideas worth considering.
Annaly Preferred Shares: Big Yield, Discounted Price, A Few Risks to Consider
Annaly Capital is a mortgage REIT (the company basically borrows money against its book value to buy mortgage related assets, mainly agency RMBS), and it often captures the eye of income-focused investors because it offers a high yield. Mortgage REITs have been through a lot this year as liquidity challenges caused heightened volatility. However, not all mortgage REITs are created equally. In this article we review Annaly Capital, with a particular focus on the preferred shares. The preferreds offer compelling high yields, price appreciation potential and they are safer than the common. We consider Annaly’s current balance sheet and liquidity, credit spreads, share price action, valuation and the big risks. We conclude with our opinion on investing.
New Options Trade: Mortgage REIT Fear Creates High Income Opportunity
As market fear (as measured by the VIX) has been rising again (as fear of a big second wave of coronavirus rises), so too has the upfront premium income in the options market been rising, particularly for mortgage REITs. This report shares a compelling option trade that generates high upfront income and gives you the chance of owing shares of an outstanding mortgage REIT with attractive agency-backed MBS at a compelling lower price. We believe this is an attractive trade to place today and potentially tomorrow, as long as the underlying stock price doesn’t move too dramatically before then.
Helicopter Fed: Top 10 mREITs and Bond CEFs (Huge Yields, Discounted Prices)
This article shares our Top 10 compelling mREITs and Bond CEFs. They trade at significant discounts to their book values and are being supported, to varying degrees, by the actions of the US Fed. The Fed is pumping an unlimited amount of liquidity into the system by buying the types of bonds these compelling mREITs and CEFs own.
Mortgage REITs: Huge Yield, Huge Opportunity
In light of recent turmoil, the Fed has now promised to do whatever it takes to support the bond market, Agency MBS in particular. Mortgage REITs that own Agency MBS are worth considering. Specifically, Agency MBS credit spreads have dropped significantly, yet mREIT share prices continue to trade at wide discounts to book values. Mortgage REITs present huge yields and huge opportunities.
Rare Counter-Cyclical Income-Oriented Company, 11.6% Yield
This real estate investment trust (“REIT”) invests in securities that are tied to the residential and commercial real estate market, in order to generate stable income. In this article, we analyze the company’s business model, growth and income prospects, balance sheet, risks, and finally conclude with our opinion on whether (and how) income-investors might want to consider investing in this stock.