Comparing Annaly Capital Management's BV, Dividend, Risk, And Valuation To Several mREIT Peers - Part 1

Sep. 2.14 | About: Annaly Capital (NLY)

Summary

NLY reported an increase in BV of 7.55% and an economic return of 10.00% during the second quarter of 2014.

NLY’s above average quarterly results, when compared to the rest of the mREIT sector, were partially due to the company’s high proportion of 30-year fixed-rate agency MBS.

NLY’s above average quarterly results were also due to an aggressive reduction of the company’s hedging coverage ratio.

As of 8/29/2014, NLY, AGNC, and ARR traded at or near a material discount to BV as of 6/30/2014 while WMC traded at a minor discount.

My current BUY, SELL, or HOLD recommendation for NLY and each company analyzed in this article will be in the “Conclusions Drawn” section of this article.

Focus of Article:

The focus of PART 1 of this article is to analyze Annaly Capital Management Inc.'s (NYSE:NLY) recent results and compare several of the company's metrics to three other mortgage real estate investment trust (mREIT) peers. This analysis will show past and current data with supporting documentation within three tables. Table 1 will compare NLY's recent BV and economic return to the three other mREIT peers. Table 1 will also provide a premium (discount) to BV analysis between NLY and the three other mREIT peers using stock prices as of 8/29/2014. Table 2 will show a general overview of NLY's MBS portfolio while Table 3 will show NLY's recent "hedging coverage ratio" over the past two quarters.

I am writing this two-part article due to the recent requests that such an analysis be specifically performed on NLY. During this analysis, each company's recent mortgage-backed securities ("MBS") and derivative portfolios will be examined to show the impacts these portfolios had on BV. Understanding the general characteristics of each company's MBS and derivative portfolios can shed some light on which companies are possibly "overvalued" or "undervalued" strictly per a "numbers" analysis. This is not the only data that should be examined to initiate a position within a particular stock/sector. However, I believe this analysis would be a good "starting-point" to begin a discussion on the topic.

At the end of this article, there will be a conclusion regarding the following comparisons between NLY and the three other mREIT peers: 1) quarterly BV increase (decrease) and economic return (loss); 2) hedging coverage ratio as of 6/30/2014; and 3) current premium (discount) to BV as of 6/30/2014. My current BUY, SELL, or HOLD recommendation for NLY and each company analyzed in this article will be in the "Conclusions Drawn" section of this article.

BV, Economic Return (Loss), and Current Premium (Discount) to BV Analysis - Overview:

Let us start this analysis by first getting accustomed to the information provided in Table 1 below. This will be beneficial when explaining how NLY compares to the company's three other mREIT peers in regards to the metrics stated earlier.

Table 1 -BV, Economic Return (Loss), and Current Premium (Discount) to BV Analysis

Click to enlarge

(Source: Table created entirely by myself, obtaining historical stock prices from NASDAQ and each company's BV per share figures from the SEC's EDGAR Database)

Table 1 above provides each company's fixed-rate agency, variable-rate agency, and non-agency MBS holdings as of 6/30/2014. Table 1 also states the following information on NLY and the three other sector peers (see each corresponding column): 1) BV per share at the end of the first quarter of 2014; 2) BV per share at the end of the second quarter of 2014; 3) BV per share change during the second quarter of 2014 (monetary amount and percentage); 4) economic return (loss) during the second quarter of 2014 (monetary amount and percentage); 5) BV per share change during the trailing six-months (monetary amount and percentage); 6) stock price as of 8/29/2014; and 7) 8/29/2014 premium (discount) to BV per share at the end of the second quarter of 2014 (monetary amount and percentage).

Now that an overview of Table 1 above has been established, let us start the comparative analysis between NLY and the three other mREIT peers.

Side Note: In my opinion, there are several different "classifications" when it comes to mREIT companies. For purposes of this article, we will only focus on two. First, there are mREIT companies that earn a majority of income from investing in agency MBS holdings. These investments consist of commercial/residential MBS, collateralized mortgage obligations ("CMO"), and agency debentures for which the principal and interest payments are guaranteed by government-sponsored entities ("GSE"). NLY, American Capital Agency Corp. (NASDAQ:AGNC), and ARMOUR Residential REIT Inc. (NYSE:ARR) are currently classified as fixed-rate agency mREIT companies. Second, there are mREIT companies that acquire both agency and non-agency MBS holdings. This type of company is known as a "hybrid" mREIT. Due to the subtle yet identifiable differences between agency and non-agency MBS, I like to differentiate between a "pure" (100%) agency mREIT company and a hybrid mREIT company. Western Asset Mortgage Capital Corp. (NYSE:WMC) is considered a hybrid mREIT company. However, it should be noted WMC currently has a majority of MBS invested in fixed-rate agency holdings. Readers should be aware as such when the analysis is presented below.

1) NLY:

Using Table 1 above as a reference, NLY had a 94% fixed-rate (6% variable-rate) agency MBS portfolio as of 6/30/2014. NLY had a BV of $12.30 per share at the end of the first quarter of 2014. NLY had a BV of $13.23 per share at the end of the second quarter of 2014. This calculates to a quarterly BV increase (decrease) of $0.93 per share or 7.55%. When including NLY's quarterly dividend of $0.30 per share, the company had an economic return (loss) of $1.23 per share or 10.00% for the second quarter of 2014.

With the exception of WMC, NLY's BV change during the second quarter of 2014 outperformed all other peers I cover in the mREIT sector (eighteen other companies). When compared to NLY's closest sector peer AGNC, the company's BV increase during the second quarter of 2014 was 0.34% higher. This was mainly attributable to the following two metrics during the second quarter of 2014: 1) MBS portfolio composition; and 2) derivative portfolio activity. Let's discuss these two metrics below.

First, NLY continued to maintain a MBS portfolio heavily invested in 30-year fixed-rate agency MBS holdings. As 30-year fixed-rate agency MBS holdings outperformed 15-year fixed-rate agency MBS holdings, companies like NLY and WMC (discussed later) directly benefited from this notion. Table 2 below highlights NLY's proportion of 15-, 20-, and 30-year fixed-rate agency MBS holdings as of 6/30/2014 and 3/31/2014.

Table 2 - NLY MBS Portfolio Composition (6/30/2014 versus 3/31/2014)

Click to enlarge(Source: Table taken from NLY's quarterly shareholder presentations for the first and second quarters of 2014)

Using Table 2 above as a reference, NLY's proportion of 15-year fixed-rate agency MBS holdings slightly decreased from 11% to 9% during the second quarter of 2014 (based on face value). NLY's proportion of 20-year fixed-rate agency MBS holdings slightly increased from 8% to 10%. As such, NLY's proportion of 30-year fixed-rate agency MBS holdings remained relatively unchanged between 80%-81%. When compared to mREIT peers like AGNC and CYS Investments Inc. (NYSE:CYS), NLY continued to have a higher proportion of 30-year fixed-rate agency MBS holdings. Since most 30-year fixed-rate agency MBS coupons had additional price increases during the second quarter of 2014 when compared to 15-year fixed-rate agency MBS coupons, companies who had a higher proportion in 30-year maturities directly benefited from additional MBS valuation gains. It should also be noted NLY's weighted average coupon ("WAC") increased from 3.78% as of 3/31/2014 to 3.83% as of 6/30/2014. Furthermore, NLY's weighted average three-month conditional prepayment rate ("CPR") only slightly increased from 5.2% as of 3/31/2014 to 6.2% as of 6/30/2014. When compared to sector peers, NLY maintained one of the lowest CPR percentages during the second quarter of 2014. All these factors contributed to NLY outperforming most sector peers during the second quarter of 2014.

Side Note: Unfortunately, NLY does not provide a "detailed breakout" of the company's fixed-rate agency MBS holdings regarding specific coupons and maturities. As such, a detailed overview of NLY's fixed-rate agency MBS portfolio is currently not possible.

Second, NLY went "rogue" when compared to the rest of the sector and made a bold (some would say risky) move regarding the company's derivative portfolio. To highlight NLY's derivative portfolio activity during the second quarter of 2014, Table 3 is presented below.

Table 3 - NLY Hedging Coverage Ratio (6/30/2014 versus 3/31/2014)

Click to enlarge

(Source: Table created entirely by myself, partially using NLY data obtained from the SEC's EDGAR Database [link provided below Table 1])

Using Table 3 above as a reference, NLY had a net long (short) interest rate swaps and swaptions position of ($56.7) and ($4.1) billion as of 3/31/2014, respectively. When calculated, NLY had a hedging coverage ratio of 94% as of 3/31/2014. When compared to other fixed-rate agency mREIT peers (AGNC, ARR, CYS) and most other hybrid mREIT peers, this was an "average" hedging coverage ratio due to the eventual risk of rising mortgage interest rates/U.S. Treasury yields.

However, while the three other mREIT peers analyzed in this article continued to maintain a fairly elevated hedging coverage ratio during the second quarter of 2014 (as will be shown later in the article), NLY materially reduced the company's ratio. NLY had a net long (short) interest rate swaps and swaptions position of ($30.8) billion and ($2.6) billion as of 6/30/2014, respectively. In addition, NLY actually increased the company's total agency MBS and debentures portfolio from $77.8 billion as of 3/31/2014 to $82.4 billion as of 6/30/2014. When calculated, NLY now had a hedging coverage ratio of only 47% as of 6/30/2014. No other mREIT company that I cover had such an aggressive reduction in one's hedging coverage ratio during the second quarter of 2014. This aggressive reduction added to NLY's above-average quarterly returns and should inherently benefit the company during the third quarter of 2014 (so far). However, readers should also understand if there is a quick, rapid rise in mortgage interest rates/U.S. Treasury yields, as of 6/30/2014, NLY was one of the most susceptible sector peers regarding interest rate risk.

Once again using Table 1 above as a reference, as of 8/29/2014 NLY's stock price traded at $11.90 per share. When calculated, this shows NLY's stock price was trading at a premium (discount) to BV as of 6/30/2014 of ($1.33) per share or (10.05%). Even though NLY's stock price has experienced a modest to material short-term price appreciation, this company continued to trade at a material discount to BV.

With that being said, existing and potential shareholders should continue to monitor mortgage interest rates/U.S. Treasury yields and understand the ramifications of NLY's materially below hedging coverage ratio as of 6/30/2014. I personally do not own any shares of NLY due to the general similarities of this company to AGNC. I believe NLY should continue to trade in line with the company's agency mREIT peers and fairly close to AGNC (percentage wise).

Side Note: NLY also had corporate debt (also known as "commercial paper") and commercial real estate debt/investment portfolios as of 6/30/2014. In my opinion, these two additional facets make NLY a slightly more attractive investment when compared to the company not having these two portfolios. As such, a continued expansion of these two portfolios could be seen as a positive sign. However, to put things in perspective, NLY's corporate debt and commercial real estate debt/investment portfolios had a combined balance of $1.81 billion as of 6/30/2014. NLY's corporate debt and commercial real estate debt/investment portfolios make up only a minor portion (approximately 2%) of NLY's total assets.

Let us perform a similar analysis (less detail) on the three other mREIT peers and see how each company compares to NLY regarding the metrics discussed above.

2) AGNC:

The first mREIT peer to compare to NLY is AGNC. Using Table 1 above as a reference, AGNC had a 95% fixed-rate (5% variable-rate) agency MBS portfolio as of 6/30/2014. AGNC had a BV of $24.49 per share at the end of the first quarter of 2014. AGNC had a BV of $26.26 per share at the end of the second quarter of 2014. This calculates to a quarterly BV increase (decrease) of $1.77 per share or 7.21%. When including AGNC's quarterly dividend of $0.65 per share, the company had an economic return (loss) of $2.42 per share or 9.88% for the second quarter of 2014.

With the exception of WMC and NLY, AGNC's BV change during the second quarter of 2014 outperformed all other peers I cover in the mREIT sector (seventeen other companies). As such, AGNC also outperformed most other sector peers. When compared to AGNC's closest mREIT peer NLY, the company's BV increase during the second quarter of 2014 was (0.34%) lower.

AGNC's material increase in BV during the second quarter of 2014 was mainly attributable to a substantial increase in MBS prices across most coupon rates partially offset by a modest derivative net valuation loss. Due to the continued rebalancing efforts and risk assessments in regards to AGNC's MBS and TBA MBS portfolios, management slightly decreased the company's hedging coverage ratio from 94% as of 3/31/2014 to 88% as of 6/30/2014. As such, AGNC remained fairly cautious regarding the company's hedging coverage ratio during the second quarter of 2014. When calculated, AGNC increased (decreased) the company's hedging coverage ratio by (6%) between 3/31/2014 and 6/30/2014. As discussed earlier, NLY increased (decreased) the company's hedging coverage ratio by (47%) during the second quarter of 2014.

Readers should understand the inherent "risk/reward" methodology that is associated with each company's derivative portfolio/hedging coverage ratio. When compared to NLY, AGNC would inherently have less risk regarding a net increase in mortgage interest rates/U.S. Treasury yields because the company had the higher hedging coverage ratio as of 6/30/2014. However, AGNC would also inherently have less reward regarding a net decrease in mortgage interest rates/U.S. Treasury yields. During the first two months of the third quarter of 2014, mortgage interest rates/U.S. Treasury yields have remained relatively flat or have had a net decrease depending on the maturity. The net decrease in rates/yields becomes more severe the farther out on the yield curve one goes. Based on this notion, it would appear NLY's reduced hedging coverage ratio has paid off so far when compared to AGNC. When comparing both derivative portfolios, AGNC would inherently have a higher level of net valuation losses on the company's interest rate swaps, swaptions, and net (short) U.S. Treasury positions (proportionally speaking). This is partially offset due to the fact AGNC had a material net long TBA MBS position as of 6/30/2014 (extension of the balance sheet) where NLY continued to have a minor net (short) TBA MBS position.

Still using Table 1 above as a reference, as of 8/29/2014 AGNC's stock price traded at $23.65 per share. When calculated, this shows AGNC's stock price was trading at a premium (discount) to BV as of 6/30/2014 of ($2.61) per share or (9.94%). Even though AGNC's stock price has experienced a modest to material short-term price appreciation, this company continued to trade near a material discount to BV.

I believe AGNC should continue to trade in line with the company's agency mREIT peers and fairly close to NLY (percentage wise). If mortgage interest rates/U.S. Treasury yields continue to net decrease, NLY's stock price should trade at less of a discount when compared to AGNC. If mortgage interest rates/U.S. Treasury yields reverse course and start to net increase once again, AGNC's stock price should trade at less of a discount when compare NLY. This projected trend is only applicable if each company does not change its recent derivative portfolio strategy.

3) ARR:

The second mREIT peer to compare to NLY is ARR. Using Table 1 above as a reference, ARR had a 96% fixed-rate (4% variable-rate/multifamily) agency MBS portfolio as of 6/30/2014. ARR had a BV of $4.67 per share at the end of the end of the first quarter of 2014. ARR had a BV of $4.90 per share at the end of the second quarter of 2014. This calculates to a quarterly BV increase (decrease) of $0.23 per share or 4.91%. When including ARR's quarterly dividend of $0.15 per share, the company had an economic return (loss) of $0.38 per share or 8.14% for the second quarter of 2014.

ARR's BV change during the second quarter of 2014 was generally in line with peers I cover in the mREIT sector (eighteen other companies) but continued to underperform when compared to AGNC, CYS, and NLY. As such, I believe ARR once again underperformed within the fixed-rate agency MBS sector during the second quarter of 2014.

I believe the underperformance was attributable to two main factors. First, ARR's proportion of 15-year fixed-rate agency MBS holdings materially increased from 24% to 63% during the first quarter of 2014 (based on FMV). As such, ARR's proportion of 30-year fixed-rate agency MBS holdings materially decreased from 44% to 7%. ARR's proportion of 15-year fixed-rate agency MBS holdings increased from 63% to 68% during the second quarter of 2014 (based on FMV). As such, ARR's proportion of 30-year fixed-rate agency MBS holdings decreased from 7% to 0%. In sharp comparison to mREIT peers like AGNC and NLY, ARR exited the company's exposure to 30-year fixed-rate agency MBS holdings altogether during the second quarter of 2014.

As stated within NLY's analysis earlier, since most 30-year fixed-rate agency MBS coupons had additional price increases during the second quarter of 2014 when compared to 15-year fixed-rate agency MBS coupons, companies who had a higher proportion in 30-year maturities directly benefited from additional MBS valuation gains. Since ARR took an extremely "defensive posture" regarding the mitigation of BV losses in a rising interest rate environment, when the market corrected itself in regards to lower mortgage interest rates/U.S. Treasury yields during the first and second quarters of 2014, ARR's more cautious strategy was proven less effective when compared to the three other mREIT companies within this analysis.

Second, ARR had a hedging coverage ratio of 101% as of 3/31/2014. This ratio slightly increased to 106% as of 6/30/2014. This would be considered a fairly high hedging coverage ratio. Again, this indicates ARR's management team wanted to materially decrease the company's exposure to rising mortgage interest rates/U.S. Treasury yields. This may prove to be correct in the long run. However, since mortgage interest rates/U.S. Treasury yields net decreased during the first and second quarters of 2014, ARR underperformed when compared to the company's fixed-rate agency mREIT peers.

Still using Table 1 above as a reference, as of 8/29/2014 ARR's stock price traded at $4.23 per share. When calculated, this shows ARR's stock price was trading at a premium (discount) to BV as of 6/30/2014 of ($0.67) per share or (13.67%). Even though ARR's stock price has experienced a modest to material short-term price appreciation, this company continued to trade at the largest discount to BV when compared to the three other mREIT companies in Table 1.

However, I believe ARR should continue to be valued lower than the three other mREIT peers within Table 1 above due to the company's past performance and recent composition of its MBS and derivative portfolios. As stated above, ARR recently shifted the company's entire MBS portfolio out of 30-year fixed-rate MBS holdings. I did not agree with this specific strategy when it was first disclosed and this opinion has not changed. Although this strategy inherently brings about a lower cost of funds rate, this strategy also brings with it a lower WAC and less MBS price appreciation when mortgage interest rates/U.S. Treasury securities net decrease (as we saw in the first and second quarters of 2014).

I have never provided an "official" BUY, SELL, or HOLD recommendation regarding ARR. However, in regards to the fixed-rate agency mREIT sector, I have stated in the past I would first look to initiate a position in AGNC, CYS, or NLY. I have stated I personally would not invest in this specific company. Based on the analysis above, including other factors not discussed within this article, I have not seen any definitive evidence to change this generalized conclusion regarding ARR.

4) WMC:

The last mREIT peer to compare to NLY is WMC. Using Table 1 above as a reference, WMC had a 68% fixed-rate (7% variable-rate) agency MBS portfolio as of 6/30/2014. In addition, WMC also had a 25% non-agency MBS portfolio as of 6/30/2014. WMC had a BV of $14.19 per share at the end of the end of the first quarter of 2014. WMC had a BV of $15.31 per share at the end of the second quarter of 2014. This calculates to a quarterly BV increase (decrease) of $1.12 per share or 7.89%. When including WMC's quarterly dividend of $0.67 per share, the company had an economic return (loss) of $1.79 per share or 12.61% for the second quarter of 2014.

WMC's BV change during the second quarter of 2014 outperformed all peers I cover in the mREIT sector (nineteen other companies). However, it should also be noted WMC had a trailing six-month BV increase (decrease) of only $0.04 per share or 0.82%. The material decrease in WMC's BV during the first quarter of 2014 was directly due to a fairly large equity offering at a material discount to the company's CURRENT BV at the time. This equity offering was dilutive to existing shareholders. From this newly acquired capital, WMC increased the company's MBS portfolio during the first quarter of 2014 which proved benefited during the second quarter of 2014 (hence the largest BV increase in the sector). Let's briefly discuss WMC's MBS portfolio composition and derivative portfolio activity during the second quarter of 2014.

In direct contrast to ARR, WMC's proportion of 15-year fixed-rate agency MBS holdings was 0% as of 6/30/2014 (based on FMV). WMC's proportion of 20 and 30-year fixed-rate agency MBS holdings was 24% and 44%, respectively. The remaining 32% of WMC's MBS portfolio was in agency interest-only ("IO") strips, non-agency IO strips, and non-agency commercial and residential MBS. When compared to NLY, AGNC, and ARR, WMC by far continues to have the largest IO strip holdings (proportionally speaking). As stated within NLY's analysis earlier, since most 30-year fixed-rate agency MBS coupons had additional price increases during the second quarter of 2014 when compared to 15-year fixed-rate agency MBS coupons, companies who had a higher proportion in 30-year maturities directly benefited from additional MBS valuation gains. When the market corrected itself in regards to lower mortgage interest rates/U.S. Treasury yields during the first and second quarter of 2014, WMC directly benefited from this particular MBS portfolio strategy.

To support this more aggressive MBS portfolio strategy, WMC had a fairly cautious hedging coverage ratio. WMC had a hedging coverage ratio of 181% as of 3/31/2014. Initially, this ratio would indicate an excessively high, extremely cautious viewpoint on behalf of WMC's management team. However, I would note this ratio is a bit deceiving due to the fact WMC increased the company's derivative portfolio during the first quarter of 2014 before fully deploying the capital raised from its equity offering. WMC fully deployed this capital during the first-half of the second quarter of 2014. As such, WMC's hedging coverage ratio decreased to 95% as of 6/30/2014. This ratio was more in-line with the sector average.

Still using Table 1 above as a reference, as of 8/29/2014 WMC's stock price traded at $15.20 per share. When calculated, this shows WMC's stock price was trading at a premium (discount) to BV as of 6/30/2014 of ($0.11) per share or (0.72%). WMC traded at a noticeably higher valuation when compared to NLY, AGNC, and ARR. However, when compared to the ten hybrid mREIT companies that I cover, as of 8/29/2014 WMC's stock price traded only at a moderately higher valuation. As of 8/29/2014, WMC traded at a premium (discount) to BV as of 6/30/2014 of (0.72%) while the hybrid mREIT average was (4.80%). As such, WMC's higher valuation, when compared to NLY, AGNC, and ARR, should be seen as less alarming. I believe WMC should continue to trade slightly above the company's hybrid mREIT peers.

Conclusions Drawn (PART 1):

PART 1 of this article has analyzed NLY and three other mREIT peers in regards to the following metrics: 1) quarterly BV increase (decrease) and economic return (loss); 2) hedging coverage ratio as of 6/30/2014; and 3) current premium (discount) to BV as of 6/30/2014.

Using Table 1 above as a reference, the following were the BV increase (decrease) and economic return (loss) percentages for NLY and the three other mREIT peers during the second quarter of 2014 (in order of highest to lowest BV change):

1) WMC: 7.89% increase in BV; 12.61% economic return

2) NLY: 7.55% increase in BV; 10.00% economic return

3) AGNC: 7.21% increase in BV; 9.88% economic return

4) ARR: 4.91% increase in BV; 8.14% economic return

Next, the following were the hedging coverage ratios for NLY and the three other mREIT peers as of 6/30/2014 (in order of highest to lowest ratio):

1) ARR: 106% hedging coverage ratio

2) WMC: 95% hedging coverage ratio

3) AGNC: 88% hedging coverage ratio

4) NLY: 47% hedging coverage ratio

Finally, the following were the 8/29/2014 premium (discount) to BV as of 6/30/2014 percentages for NLY and the three other mREIT peers (in order of highest to lowest discount):

1) ARR: (13.67%) discount to BV as of 6/30/2014

2) NLY: (10.05%) discount to BV as of 6/30/2014

3) AGNC: (9.94%) discount to BV as of 6/30/2014

4) WMC: (0.72%) discount to BV as of 6/30/2014

From the analysis provided above, including additional factors not described within this article, I currently rate NLY, AGNC, and WMC as a STRONG HOLD when each company's stock price is trading at a minor (under 5%) discount to BV as of 6/30/2014, a BUY when trading at a modest (at or over 5% but under 10%) discount to BV as of 6/30/2014, and a STRONG BUY when trading at a material discount (over 10% discount) to BV as of 6/30/2014. I believe ARR has continued to underperform when compared to NLY, AGNC, and WMC. As such, I have no rating on ARR and currently will not look towards this company as a possible investment.

Important Note in Regards to NLY: When management reduced the company's hedging coverage ratio by half during the second quarter of 2014, existing and potential NLY shareholders should understand the 6/30/2014 risk/reward profile in place with this mREIT. As long as mortgage interest rates/U.S. Treasury yields remain flat or net decrease (on a quarter over quarter basis), as of 6/30/2014 NLY positioned the company to reap the rewards of an aggressive strategy in rewards to interest rate risk. However, readers should also understand if markets experience a quick, rapid rise in mortgage interest rates/U.S. Treasury yields, as of 6/30/2014 NLY was one of the most susceptible mREIT companies regarding MBS valuation losses with fairly low offsetting derivative valuation gains. While NLY may have already increased the company's hedging coverage ratio during the third quarter of 2014, I believe readers should still understand the impacts of such a strategy with data as of 6/30/2014.

Final Note: After dividends are declared for the entire mREIT sector for the third quarter of 2014, I will provide PART 2 of this article taking a look at the recent past and current dividend rates and yields for these four mREIT peers (including all recent material events if applicable).

Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal recommendation may not fit each investor's current investing strategy.

Disclosure: The author is long AGNC.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I currently have no position in NLY, ARR, or WMC.