Seeking Alpha

Income stocks hit hard by rising yields

  • Anything paying income is again being particularly hard hit by the rise in Treasury yields (the 10-year now at a 2-year high of 2.8%).
  • Selections in mREITs (REM -2.1%), (MORT -1.9%) include RAIT Financial Trust (RAS -4.1%) - whose IRT had an ill-timed IPO yesterday and Ellington Residential (EARN -4.8%) - the market not caring about reasonable Q2 performance, a hefty discount to book, and the launch of a repurchase program. Other mREITs: CYS Investments (CYS -3.6%), Apollo (AMTG -3%), Newcastle (NCT -5%), Invesco (IVR -2.7%), Arlington Asset (AI -1.2%). A leveraged ETF play: MORL.
  • Hanging in there relatively well are the BDCs: Fifth Street (FSC -1.3%), Triangle (TCAP -1%), MCG (MCGC -1.2%), Hercules (HTGC -1.2%), Ares (ARCC -0.3%).
  • BDC ETFs: BDCS, BDCL, BIZD.
  • In emerging markets fixed income, a trader takes note of EDD,  a closed-end fund now trading at more than a 15% discount to NAV.
  • Emerging market bond ETFs: EMB, LEMB, PCY, EMLC, ELD, PFEM, EBND, VWOB.
Comments (13)
  • mrmedusa
    , contributor
    Comments (343) | Send Message
     
    Thanks for the mention of PSEC in the "hanging in there" department. down .27%
    15 Aug 2013, 11:15 AM Reply Like
  • doc47
    , contributor
    Comments (1119) | Send Message
     
    TCAP is also hanging in there. They just had a decent earnings report and will go ex-dividend in less than a month. I'll being "hanging in there" at least that long.
    15 Aug 2013, 11:28 AM Reply Like
  • fayrweather
    , contributor
    Comments (73) | Send Message
     
    Good, I'll buy more MORL, nice. Give me a discount.
    15 Aug 2013, 12:00 PM Reply Like
  • mrmedusa
    , contributor
    Comments (343) | Send Message
     
    Should be a good run up until the next big dividend in October.
    15 Aug 2013, 12:05 PM Reply Like
  • FlaYankee
    , contributor
    Comments (123) | Send Message
     
    Huge selloff in many of these stocks makes them more attractive as their corresponding yields climb on their lower share prices. It all seems a bit overdone to me as climbing yields will eventually serve as a drag on the economy which isn't exactly roaring ahead on its own merits. I wouldn't consider GDP growth at the hair raising speed of 1.7% as exactly warranting a huge spike in interest rates but here they are regardless and due more to the mere hint of a fed slowdown in their monthly bond purchasing program. Selloffs are a great time to add or establish positions in stocks that get unduly punished. Added to AI and MORL.
    15 Aug 2013, 01:06 PM Reply Like
  • User 7140591
    , contributor
    Comments (16) | Send Message
     
    I do not understand the hysterical response of certain investors, pulling out of dividend stocks paying sometimes 3 times what treasuries are paying, and with growth potential on top of that.

     

    3% really isnt a yield worth the time and effort.
    15 Aug 2013, 02:01 PM Reply Like
  • jokes21
    , contributor
    Comments (36) | Send Message
     
    WOW you mean I can get a 3% yield on a 10-yr treasury note?! That's amazing! Just dumped all my dividend stocks.
    15 Aug 2013, 03:17 PM Reply Like
  • Davephd
    , contributor
    Comments (765) | Send Message
     
    Just think about it, with treasury notes you can loose only about 1 to 2% to inflation and also you don't have to pay so much income tax on the earnings you are missing.
    15 Aug 2013, 04:28 PM Reply Like
  • mrmedusa
    , contributor
    Comments (343) | Send Message
     
    I'm with ya! Why settle for 12% when I can get 3?
    15 Aug 2013, 08:44 PM Reply Like
  • mostserene1
    , contributor
    Comments (3344) | Send Message
     
    Absurd. It's buying time for "income stocks".
    15 Aug 2013, 04:01 PM Reply Like
  • tstreet
    , contributor
    Comments (734) | Send Message
     
    Crying time?
    16 Aug 2013, 09:22 AM Reply Like
  • tstreet
    , contributor
    Comments (734) | Send Message
     
    I think it is pretty clear that AGNC, for example, has hedged their book to minimize the correlation between, for example, the 10 year, and their BV. A previous article gave it a good rating with respect to interest rate risk. Despite that, the market acts like AGNC has done nothing to anticipate interest rate increases. So, while the stock price goes down , it is probably going down faster than the BV.

     

    I could be wrong, of course, and would be glad to hear where I am wrong as my AGNC shares will probably be called out this next expiration.

     

    However, the knee jerk relationship between treasuries and stock price continue regardless of any facts that might be introduced into the equation.
    16 Aug 2013, 09:19 AM Reply Like
  • FlaYankee
    , contributor
    Comments (123) | Send Message
     
    Why would anybody even consider buying treasury securities with their low, low yields and when you figure in taxes and inflation you are down to just about zero. I'll take my beating in income stocks as their lower prices will equate to even higher yields and selloffs like the current one represents an opportunity to add or open new positions. Panic selling has never been a strategy and when there is fear in the market smart investors are the ones that step up when everyone wants out. Interest rate risk though real is seems a bit overdone as higher interest rates will eventually have an adverse impact on this slow chugging economy.
    16 Aug 2013, 09:40 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector