Rolling with the trend, Credit Suisse ups its return expectations for mREITs to 9% for 2014 from a 6% guess at the start of the year. Said 9% will be comprised of 11% in dividends and a 2% decline in book value - a bold statement considering book values have likely grown smartly YTD.
The top picks include a couple of hybrid players. PennyMac Mortgage Investment Trust (PMT +0.1%) and Two Harbors (TWO +0.9%), plus Newcastle Investment (NCT +1.6%). Newcastle management won't throw the recommendation out of bed, but must be scratching its head as - two spinoffs later - investors still casually lump the company into a sector it probably doesn't belong in. At this point, NCT is more senior housing REIT than anything else. Still, CS's point is those REITs with real operating assets as opposed to just paper are likely to outperform in a rising rate environment.