Tag Archives: nly

mREIT valuation & interest rate risk

In today’s hunt for yield mREITs seem to be an increasingly popular choice. The sector offers yields in the range of 13%. With even high yield bonds trading down to yields of ~7% an almost doubling of potential yield is compelling. But have investors chased yield too much and what happens if rates change dramatically? Today I want to do a check on the valuation of mREITs in general and look at the potential impact of changing interest rates on the business. First, lets take a look at valuation. I’ve covered mREIT basics on the blog before so if you’re … Continue reading

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Mortgage REIT Q2 2011 dividend announcements

I thought today would be a good day to discuss the recent Q2 2011 dividend announcements from the mortgage REIT (mREIT) companies that I track. Six out of the seven mREITs I follow have announced their Q2 dividends. For my previous posts on mREITs see here. Also, today the fed announced their latest policy decision which also has a potential impact on mREITs. Lets dive in. For Q2 2011 dividends for mREITs with non-agency exposure were reduced. Both CIM and IVR reduced their dividends for Q2. On the agency side dividends stayed the same with the exception of NLY. NLY … Continue reading

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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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Increasing focus on mortgage REITs

I apologize for the hiatus in posting the last few days. We currently have the RV parked in the Gila National Forest in a pretty remote location with no power, no communications. It’s a 23 mile drive down the mountain to the nearest access. Good thing there is a good barbeque place on the way for extra incentive. Now, on to my post for today. It’s getting tougher these days to find under priced areas in the market. But even in the most extreme markets there are a few. One area that I’m finding good value in is the mortgage … Continue reading

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Understanding mortgage REITs: Annaly Mortgage

Today I want to delve into a widely misunderstood part of the market – mortgage REITs. This misunderstanding creates some great opportunities for income investors to enhance returns and income without taking on much more risk. I’ll focus my discussion on the biggest and best of the mortgage REITs, Annaly Capital Management Inc, symbol NLY. Mortgage REITs are real estate investment trusts that invest in mortgages, usually through mortgage backed securities. The basic business model is the same for all of them. They invest in mortgage backed securities at a certain yield. They use leverage on their equity to fund … Continue reading

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Christmas wish list, part 2

Today we woke up to a cool rainy Florida winter day, a perfect time for me to reflect on the next 5 stocks on my Christmas wish list (part I here) with a nice cup of hot cocoa by my side. I’m going to keep the list to the top 10 lest I revert back to my childhood ways of writing Christmas wish lists that could have been classified as short stories. Here ya go: 6. PM, Philip Morris International: until not too long ago, part of Altria. It is the international tobacco leader and exposed to more growth than … Continue reading

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Christmas wish list, part one

At this time of year our thoughts usually turn to the holiday festivities, family gatherings and such. While no different for me, I usually have one more activity at this time of year that puts me in the Christmas spirit, the creation of an investing wish list. Making an investment wish list, in this case a Christmas wish list is a great investment activity. Its like investment practice, or studying for an exam. With such a list at hand when an opportunity presents itself you will be ready to pounce. The list does not need to be detailed but should … Continue reading

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