Tag Archives: mortgage REIT

Interest rate risk in mortgage REITs

In several previous posts on mortgage REITs (mREITs) I have discussed the basics of understanding them, that there could be a good investment opportunity in them, and I presented an economic model that breaks down their sources of earnings and dividends. Now, its time to address the very important topic of the risk in investing in mREITs and how an investor can gauge and monitor that risk. There are three main sources of risk in mREITs; credit risk, liquidity risk, and interest rate risk. Note, that I do not consider the market’s standard definition of risk, volatility, as a source … Continue reading

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Mortgage REIT economics remain compelling

As I mentioned in this earlier post I think there is an good investment opportunity in mortgage REITs (mREITs from now on). Its one of the the few remaining relatively undervalued sectors in the market and offers a compelling dividend yield of about 16%. In this post I’ll provide a basic economic framework to evaluate REITs and provide valuations for the big cap (>$1B) MLP names I’ll be covering. In my first post on mREITs I described how the companies in this sector make money. Basically, the companies leverage up their equity and invest the funds in mortgage backed securities. … Continue reading

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