I present information on MREITs and MLPs and receive comments and questions about the high risk based on these investments. By no means do I encourage you to only invest in these, as you should have a well-rounded portfolio. If you do not have an investment plan that helps diversify you should get one immediately. MREITs and MLPs should only be a part of your investment strategy. I like to consider them as the cream on top as you build a solid foundation of mutual funds, blue chip stocks, various industries and maybe some international flavor to your portfolio. My recommendation with MREITs and MLPs is to take the cash dividends/distributions, which can provide income to live on, or opportunity to build other investments. But my favorite position by taking the cash is, I keep my same number of shares/units, and reduce the my risk by taking the profits. I like these 4 opportunities to profit.
On November 7, 2013, Western Asset Mortgage Capital Corporation (NYSE: WMC) reported a net income of $7.5 million, or $0.31 per basic and diluted share for the third quarter ended September 30, 2013. Core earnings for the third quarter were $20.1 million, or $0.83 per basic and diluted share. The Company also reported a net book value of $16.81 per share as of September 30, 2013.
On September 19, 2013, the Company declared a regular dividend of $0.90 per share of common stock payable on September 26, 2013, with respect to the quarter ending September 30, 2013. Since inception WMC has declared and paid 6 quarterly dividends that total $106.6 million dollars, for $5.10 per share. The current dividend yield is 22% and demonstrates a positive outlook for the future. With a consistent return and good business practices, I would expect the price to rise, giving the current investors a nice valuation in the stock price. I would expect the price to increase near $20 - $22 a share over the next 60 days.
On November 1, 2013 the company released its 3Q 2013 financial statement ending September 30, 2013. The Company earned net income of $7.5 million, or $0.31 per basic and diluted share. Included in the net income was $37.5 million of net unrealized gain on MBS. During the period, the Company generated core earnings of $20.1 million, or $0.83 per basic and diluted share. Net interest income for the period was $26.4 million. The complete financial statement can be found on the company website under the 11/7/2013 news release linked above.
Western Asset Mortgage Capital Corporation (Corporate Profile) is a real estate investment trust, or REIT, focused on investing in, financing, and managing primarily Agency Residential mortgage-backed securities. Western Asset Mortgage Capital Corp is externally managed and advised by Western Asset Management Company, or our Manager, an investment advisor registered with the U.S. Securities and Exchange Commission, and a wholly-owned subsidiary of Legg Mason, Inc. (NYSE: LM).
American Capital Agency Corp (NYSE: AGNC) presented on November 20, 2013 at the Citi Global Financial Conference in Hong Kong. Here are the slides from the presentation. (The company has more information on its website.) The presentation is heavily weighted toward the U.S. mortgage market and how AGNC's business model and operations of managing the funding purchasing and selling in the marketplace, how to manage the leverage and the interest rate exposure that determines the challenges and success of the mortgage market.
AGNC's IPO was in May 2008 with a price of $20.00 per share. Throughout the financial crisis through 3Q 2013, the company has paid dividends of $26.96, with a current book price of $25.27 per share. The latest dividend was paid on September 26, 2013 of $0.80. Had an investor purchased the shares on the day of the IPO at the initial price the investor would have received his total investment back in cash dividends (plus some), and still had the original shares purchased. Based on the continuing numbers from the quarterly reports, I believe the company can continue to pay dividends and over the next 6-10 years return another 100% of the initial investments.
Page 18 (from the conference link above) of the presentation is extremely valuable to demonstrate the accomplishments by the company. AGNC has been a leader in portfolio management.
3Q 2013 quarterly financial report highlights a$0.45 comprehensive income per common share, with $0.58 net spread and dollar roll income. An estimated $0.29 taxable income per common share that provided a dividend 0f $0.80 per share and $0.57 undistributed taxable income per common share. The net book value is $25.27 as of September 30, 2013, down $0.24 from June 30, 2013.
Insider buying over the last 6 months has included 4 purchases. In the last 4 weeks 24,500 shares purchased. In the last quarter, another 24.500 shares purchased and in the last 6 months 50,000 shares purchased. With insiders consistently enhancing their position in the company the investor can feel more comfortable that management is buying into the profits of the company's work.
With the current leadership and control measures the company has in place, we expect continued success in the future. AGNC has demonstrated success operations returning better than the norm. We expected continued results in the future.
ARMOUR Residential REIT Inc (NYSE: ARR) is a monthly paying REIT that has seen its year-to-date stock price drop 37%, and the yield on the dividend drop also. The current dividend is $0.05 per month, per share, which represents a 15% yield. ARMOUR announced on September 18, 2013 the dividend for October, November and December, 2013 as $0.05 per share, each month. The stock price is stable between $4.00 and $4.15.
In the 3Q, 2013 financial report the company reported a mixed bag of good and no-so-good news. The Core Income of $43.8 million, which is $0.11 per share. Estimated taxable REIT income of $3.8 million. Q3 2013 GAAP net loss of approximately $229.9 million or $0.63 per Common share. Stockholders' equity as of September 30, 2013 was $2.2 billion or $5.26 per Common share. The third quarter of 2013 represented a period of disruptive volatility in the bond and mortgage markets. In order to reduce the Company's exposure to this volatility, the Company sold $6.0 billion of Agency Securities, resulting in realized losses of $301.0 million. As of September 30, 2013, the Company's portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities and was valued at $16.7 billion. During the third quarter of 2013, the annualized yield on average assets was 2.60%, and the annualized cost of funds on average liabilities (including realized cost of hedges) was 1.36%, resulting in a net interest spread of 1.24% for the quarter. As the market as a whole over-reacted to the statement from the Fed Chairman in May 2013 to begin tapering the purchase of bonds, the company, along with the market in general, restructured their position to prepare for the changes in interest rates. The company is in a much stronger position today to begin the taper when the federal government begins sometime in Spring or Summer of 2014.
ARR is a solid investment and pays a monthly dividend that provides a quick return on your investment, and because it is a monthly dividend, the price does not go up right before the ex-date, and drop soon after. This provides a cash flow and stability for the investor.
JAVELIN Mortgage Investment Corp (NYSE:JMI) is a monthly paying REIT that has seen its year-to-date stock price drop 38%, and the yield on the dividend drop also. The current dividend is $0.15 per month, per share, which represents a 15.1% yield. Javelin announced on September 18, 2013 the dividend for October, November and December, 2013 as $0.15 per share, each month. The stock price is stable between $11.75 and $12.50.
In the 3Q, 2013 financial report the company estimated taxable REIT income of $7.3 million represents 14.2% annualized yield on stockholders' equity. Q3 2013 GAAP net loss of $37.2 million or $2.76 per Common share. The Board authorizes repurchase of up to 2 million Common shares. Stockholders' equity as of September 30, 2013 was $198.3 million or $14.69 per Common share outstanding. With the current stock price of $11.86 during midday trading on November 20, 2013, the investors have near $3.00 above book value in the stock.
Javelin Mortgage Investment is engaged in investing primarily in hybrid adjustable rate, adjustable rate and fixed rate mortgage backed securities and mortgage loans. Some of these securities are issued or guaranteed by a U.S. Government-sponsored entity or guaranteed by the Government National Mortgage Administration and other securities backed by residential and/or commercial mortgages. Co. also may invest in collateralized commercial mortgage backed securities and other mortgage related investments, including mortgage loans, mortgage related derivatives and mortgage servicing rights. Co. is externally managed by ARMOUR Residential Management LLC, pursuant to a management agreement.
With a dividend already announced for the next two months, we anticipate 2014 will follow in the same footsteps of profitability and dividends as cash returns to investors.
These MREITs stocks are high paying dividend focused that have value in your portfolio. I recommend taking the dividend in cash payment that provides several benefits. First is it can supplement your living income. Second, when you take the cash, you retain the number of shares, while reducing the original cost of your investment. These investment companies have good management teams and have been producing profits and dividend for their investors.
Disclosure: I am long WMC, AGNC, ARR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.