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Suman Chatterjee
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Financial analyst-writer for the last 5 years. Writes for a number of financial publications including The Street, Motley Fool and Seeking Alpha. Completed his Bachelors in Business Administration (Finance) with GPA 3.0, currently pursuing Chartered Accountancy from ICAI, India. Specializes in... More
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  • Will M-REITs Continue To Bear Dividend Fruits In The Future? 0 comments
    Jul 31, 2012 1:05 AM | about stocks: AGNC, ANH, CIM, CMO, CXS, HTS, NLY, RWT

    Average fixed mortgage rates again fell to record lows over the past week after elections in France and Greece added to worries over the future of the euro zone and its common currency.

    My common sense tells me, if mortgage rates go low, it probably strives to provide an impetus to the US population to buy real estate properties. But with the number of baby boomers retiring this year rising to 800,000, up from 650,000 last year, call me ignorant but I want to know wherefrom the baby boomers will buy further properties this year.

    Not to mention the fact that most Americans are burdened with huge debt at the moment. Is there any more room for further debt? I don't think so. Only if the additional investment might promise some risky return, then it can seem luring for the American people, don't you think?

    And suppose no one is going for mortgages anymore, where will the mortgage income come from. And more interestingly, if the mortgage rates continue to fall, you run a huge prepayment risk. Moreover, if the mortgage rates fall, the profits of the mortgage-REITs can suffer, since they mostly earn from the interest spread. How are the m-REITs pre-planning for the probable disaster? I will probably take some of the biggest m-REITs below and analyze how they are dealing with the current economic situation.

     

    Market Cap

    Dividend Yield

    Price to Book Ratio

    Long Term Debt-to-Equity

    Return on Average Assets

    Price (As of Today)

    Crexus Investment (NYSE:CXS)

    790.72mn

    10.41%

    0.86x

    Nil

    15.04%

    $10.36

    Chimera Investment (NYSE:CIM)

    2.91bn

    15.6%

    0.79x

    60.96

    8.4%

    $2.83

    American Capital Agency (NASDAQ:AGNC)

    9.64bn

    15.61%

    1.16x

    Nil

    2.13%

    $32.19

    Anworth Mortgage Asset (NYSE:ANH)

    923.94mn

    12.35%

    0.97x

    3.7

    1.48%

    $6.77

    Annaly Capital Management (NYSE:NLY)

    16.21bn

    12.37%

    1.04x

    3.42

    0.36%

    $16.66

    Hatteras Financial (NYSE:HTS)

    2.87bn

    12.28%

    1.08x

    Nil

    1.99%

    $29.34

    Redwood Trust (NYSE:RWT)

    947.88mn

    8.28%

    1.06x

    479.38

    0.46%

    $12.02

    Capstead Mortgage (NYSE:CMO)

    1.29bn

    12.37%

    1.11x

    7.98

    1.47%

    $13.88

    It seems Crexus Investment shows promises in terms of performing assets, while if you are looking for capital gains, Chimera might be your choice. American Agency still topped the list with the highest dividend yield rate.

    But what happens in the recent future? Will they be able to sustain the impact of the falling mortgage rates?

    What do you think? Let me know your precious opinions.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: AGNC, ANH, CIM, CMO, CXS, HTS, NLY, RWT
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