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Book value is a metric used by many investors to evaluate a stock investment. It is measured by taking the total assets held by a company and subtracting the liabilities. This gives investors some basis for what the dollar value per share might be in the event of a liquidation or a possible asset sale of the company.

With all the negative headlines surrounding the mortgage real estate investment trusts (mREIT), now is a good time to consider which mREIT stocks have the highest asset values on a per share basis. Recently investors have been concerned that the Obama Administration would propose a plan that would allow homeowners with no equity to refinance at lower rates, as this would reduce returns for investors.

New concerns about the sector also surfaced from the Securities and Exchange Commission (SEC) when they announced an inquiry into the amount of leverage that these companies use. Furthermore, some believe that the funding market used by these companies could dry up due to the crisis in Europe, but that has not happened and the Federal Reserve is standing by to provide liquidity, if needed.

All of the concerns appear to be overblown and I think it makes sense to buy the dips in this sector, especially when you consider that these stocks are trading close to or below book value, which indicates what investors might hypothetically receive in the event of a voluntary liquidation. Here are the stocks to consider:

Invesco Mortgage Capital (NYSE:IVR) is a mortgage real estate investment trust (REIT) company based in Georgia. This is one of the highest yielding mREIT stocks and it is also trading at a very large discount to book value. The stock yields about 22% and the discount to book value is about 20%. The stock appears extremely undervalued and that might be why insiders have been buying lately. See the insider buying here.

Here are some key points for IVR:

  • Current share price: $14.38
  • The 52 week range is $12.55 to $24.07
  • Earnings estimates for 2011: $3.74 per share
  • Earnings estimates for 2012: $3.55 per share
  • Annual dividend: $3.20 per share which yields 22.3%
  • Book value: $19.32 per share

Chimera Investment Corporation (NYSE:CIM) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities, as well as both commercial and residential mortgage loans. With a yield of about 18%, and a share price below book value, this looks like a great buying opportunity.

Here are some key points for CIM:

  • Current share price: $2.84
  • The 52 week range is $2.38 to $4.36
  • Earnings estimates for 2011: 60 cents per share
  • Earnings estimates for 2012: 59 cents per share
  • Annual dividend: 52 cents per share which yields 18.2%
  • Book value: $3.35 per share

Annaly Capital Management, Inc., (NYSE:NLY) is a mortgage real estate investment trust (REIT) company based in New York. Annaly pays a dividend of about $2.60 annually which is equivalent to a yield of around 14.6%. Cramer has given this stock a buy rating. Many investors believe that Annaly is one of the best managed companies in this sector.

Here are some key points for NLY:

  • Current share price: $16.12
  • The 52 week range is $14.05 to $18.79.
  • Earnings estimates for 2011: $2.53 per share
  • Earnings estimates for 2012: $2.38 per share
  • Annual dividend: $2.60 per share which yields 14.4%
  • Book value: $16.55 per share

Hatteras Financial Corp (NYSE:HTS) is a mortgage real estate investment trust (REIT) company based in North Carolina. HTS trades at a substantial discount to book value. On Tuesday, October 4, 2011, this stock plunged to $22.33, (a new 52 week low) on heavy volume and has started to recover.

Here are some key points for HTS:

  • Current share price: $24.49
  • The 52 week range is $22.33 to $31.98.
  • Earnings estimates for 2011: $4.20 per share
  • Earnings estimates for 2012: $4.23 per share
  • Annual dividend: $4 per share which yields 15.2%
  • Book value: $26.72 per share

MFA Financial (NYSE:MFA) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities. MFA trades at a discount of about 10% to book value. On Tuesday, October 4, 2011, this stock plunged to $6.25, and this was a new 52 week low. This stock has not rebounded yet and looks to be a great value.

Here are some key points for MFA:

  • Current share price: $6.55
  • The 52 week range is $6.25 to $8.64
  • Earnings estimates for 2011: $1.01 per share
  • Earnings estimates for 2012: $1.06 per share
  • Annual dividend: $1 per share which yields 14.2%
  • Book value: $7.75 per share

Armour Residential REIT (NYSE:ARR) is a real estate investment trust (REIT) that invests in residential mortgage-backed securities. ARR trades at a small discount to book value, and offers a very high yield at nearly 20%. On Tuesday, October 4, 2011, this stock dropped to a new 52 week low of $5.40, but has rebounded sharply since.

Here are some key points for ARR:

  • Current share price: $6.81
  • The 52 week range is $5.40 to $8.33
  • Earnings estimates for 2011: $1.01 per share
  • Earnings estimates for 2012: $1.06 per share
  • Annual dividend: $1.44 per share which yields 19.3%
  • Book value: $7.14 per share

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Disclosure: I am long CIM.

Source: 6 Of The Cheapest mREIT Stocks Based On Book Value