Mortgage real estate investment trusts (mREITs) offer high yield income to dividend investors. I am buying three mREITs, which are exceeding my expectations. These names include Apollo Residential Mortgage, Inc. (AMTG); AG Mortgage Investment Trust, Inc. (MITT); and Western Asset Mortgage Capital Corporation (WMC). I will highlight their dividend yields and why I continue to purchase their respective shares.
Apollo Residential Mortgage, Inc.
Apollo Residential Mortgage is a hybrid mREIT. The company recently announced their 3rd quarter dividend. The dividend is 85 cents per share. The dividend is payable on October 31 to shareholders of record on September 28. The annual dividend of $3.40 is a 14.60% annual dividend. This is a 10 cent dividend increase from the 2nd quarter's 75 cent dividend.
AMTG Total Return Price data by YCharts
8% Preferred Shares
Apollo Residential Mortgage, on September 20, announced the closing of an $172.5 million public offering of the company's 8.00% Series A Cumulative Redeemable Perpetual Preferred Stock (the "Series A Preferred Stock") with a liquidation preference of $25 per share.
The net proceeds are used to purchase agency MBS and non agency MBS. They serve as a source of capital for Apollo Residential Mortgage to perform their day to day business operations.
Apollo Residential Mortgage is externally managed and advised by ARM Manager, LLC. ARM Manager, LLC is an indirect subsidiary of Apollo Global Management, LLC (APO). Apollo Global Management, LLC is an alternative investment manager with approximately $105 billion of assets under management as of June 30, 2012.
I am adding shares due to the 14.6% yield. The external managers are proven as successful money managers. The shares have increased by 37.01% since July 22, 2011. The dividend has also increased in payout per share.
AG Mortgage Investment Trust, Inc.
AG Mortgage Investment Trust is a hybrid mREIT. The book value was $21.78 as of June 30th, 2012. The external manager is AG REIT Management, LLC. The LLC is a subsidiary of Angelo, Gordon & Co., L.P., or Angelo, Gordon. Angelo, Gordon's business expertise is in three core competencies: credit, real estate and private equity.
MITT Total Return Price data by YCharts
AG Mortgage Investment Trust pays a quarterly dividend of 77 cents. This was a 10% increase from the prior quarter of 70 cents. The current dividend yield is 13%.
I expect AG Mortgage Investment Trust to continue to prosper as a hybrid mREIT. This is due to the external manager's expertise in credit quality and real estate. A hybrid mREIT buys agency MBS and non agency mortgage backed securities (MBS). The external manager specializes in the niche to cherry pick valuable hybrid MBS.
8% Preferred Shares
AG Mortgage Investment Trust, on September 20, announced the public offering of 4,000,000 shares of its 8.00% Series B Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share. This amounted to $100 million gross proceeds. For individual investors, an 8% yield is highly attractive. In comparison, the 10 Year Treasury Bond yields 1.80% as of September 20.
I continue to purchase new shares in AG Mortgage Investment Trust. I believe in hybrid MBS in the current economic environment. I respect the external manager's expertise. A 13% yield is an enticing dividend.
Western Asset Mortgage Capital Corporation
Western Asset Mortgage Capital is a hybrid mREIT. The company began trading on May 11. I believe it is important to note that the mREIT can, per SEC filings, invest in non agency MBS. This is crucial to mREIT investors. An agency mREIT invests in only securities implicitly guaranteed by the U.S. Federal Government. Non agency MBS do not have an implicit government guarantee.
Non Agency MBS versus Agency MBS
Many investors want to invest in pure play agency mREITs. American Capital Agency (AGNC) invests only in agency MBS. Investors expect the SEC 10Q's to reflect a pure play agency MBS portfolio on the American Capital Agency balance sheet. American Capital Mortgage (MTGE) was explicitly set up to be a hybrid mREIT. As a sister fund to American Capital Agency, investors know that management can invest in non agency MBS within American Capital Mortgage MBS portfolio.
WMC Total Return Price data by YCharts
A non agency mREIT has greater opportunities for MBS bargains. Non agency MBS can be purchased at a significant discount. Since an implicit guarantee does not exist with non agency MBS, the purchase price can be enticing and rewarding to the mREIT. I am anxious to review the Western Asset Mortgage Capital SEC 10Q for the extent of non agency MBS portfolio holdings.
The company's first dividend was a stub dividend for the 2nd quarter. The mREIT only operated for approximately 50% of the 2nd quarter timeframe.
September 20 Dividend Update
The mREIT announced positive news today. The company announced the 3rd quarter dividend is 85 cents per share. The company also announced a September 14 book value per share of $22.68. The 3rd quarter dividend's ex-dividend date is September 27 and payable on October 25.
The market was upbeat about the company's dividend increase and increase in book value. The Western Asset Mortgage Capital's shares were up 8.34% in after hours. The stock was up $1.86 per share to $24.16. The stock yields 14% based upon a stock price of $24.16 and an annual dividend of $3.40 per share.
The external manager is Western Capital. Western Capital is a unit of Legg Mason. The team is well respected in the fixed income and bond markets.
I have continued to buy shares due to the manager's proven success. Today's news exceeded my expectations both in book value per share and quarterly dividend. The shares have appreciated 19.65% since their May 11th debut.
I own stocks that produce results. I want management teams that produce positive results and don't offer excuses. I continue to buy shares in the above three mREITs because they produce positive results. The yields provide ample cash flow to purchase additional shares and diversify outside the mREIT space.