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Mortgage REITs continue to get repriced for lower yields going forward with earnings reports...

Mortgage REITs continue to get repriced for lower yields going forward with earnings reports from JPMorgan and Wells Fargo not bringing good news. Both banks reported sliding net interest margins and booming mortgage business (some, if not most of which is refinancing) - an ugly combination for leveraged owners of MBS.
Comments (66)
  • Based on 2013 earnings forecast expect dividend to drop to $1.08 which is still 12-13% range.
    12 Oct 2012, 02:50 PM Reply Like
  • a few short brief words of caution concerning the mREITS:


    If the interest payment amount sounds too good to be true, it is.....
    12 Oct 2012, 05:04 PM Reply Like
  • ... Not so far! I bet you never pulled the trigger and are regretting it.
    13 Oct 2012, 02:39 AM Reply Like
  • Yea, that's 12-13% based on the ratio of EPS to share price. If the share price keeps dropping as fast or faster than the dividend, the rate will remain high-----likely not going to make up for a capital loss
    13 Oct 2012, 04:18 PM Reply Like
  • curious though, what if they start selling off their mbs to the fed at a premium because they anticipate the spread to drop. the dividend will remain constant, book value will decrease, but the risk with a low spread will be mitigated.
    14 Oct 2012, 10:54 AM Reply Like
  • The future yields of mREITS may be (OK, they will be) lower than they are today, but what are better alternatives for income investors? Bonds? CD's? Cash? Even if yields on AGNC or ARR drop to 10 percent, who could complain?
    12 Oct 2012, 02:53 PM Reply Like
  • If anybody thinks I'm going to sell because the dividend yield is falling from 15% to 12%, they must be crazy. Junk Bonds (JNK) are only paying out 6-7%. Corporate stock is only yielding 2-4%. Treasuries are paying 1.5%.


    So like I said, I'll stick with MREITS because 12% is still double or triple what you'll find elsewhere.
    12 Oct 2012, 02:53 PM Reply Like
  • I'm with you here. With the Fed promising rates near zero until at least mid-2015, the mREITS will be okay. Maybe some spread shrinkage from re-fi but still a better yield than you can find on any other equity whose assets are guaranteed by the U.S. Government.
    12 Oct 2012, 03:00 PM Reply Like
  • As much as I agree with the above, you cannot help but wonder how exactly is QE effecting agnc, or better yet has agnc prepared for QE.


    Even if the dividend goes down to 1.00, still good enough. But if QE really turned things upside down, well, we might see some prepayments agnc couldnt prepare for. Those reports from WFC and JPM are not promising for AGNC.
    12 Oct 2012, 04:23 PM Reply Like
  • Agree, Alby.
    12 Oct 2012, 04:26 PM Reply Like
  • This junk one, HIX, yields 9.49%


    I agree with you; am sticking, too.
    13 Oct 2012, 02:44 AM Reply Like
  • Remember, however, that you're trusting the fed to be telling the truth. That's not something I'm willing to bank all my assets on.
    15 Oct 2012, 11:16 AM Reply Like
  • Shouldn't "bank" all your assets in any one sector anyway.
    15 Oct 2012, 01:36 PM Reply Like
  • The management at NLY has continued to produce great returns since late 1990s, through volatile and unusual times. Why should they be unable to continue to thrive through QE3, or are today's tough times "different" than 1997, 2001 or 2008?
    16 Oct 2012, 12:05 AM Reply Like
  • Sell those stinking mREITs.


    My wife has a birthday coming up.
    12 Oct 2012, 02:55 PM Reply Like
  • Nobody's building commercial real estate as there is a glut on the market, however, dark fiber was in the same pickle years ago and all of a sudden all the fiber is becoming valuable. RE will turn around quicker than projects can be built, ergo, Mreits will be moving on up.


    My only reserve is, try not to hang from a rope until it does..your neck may be stretched further than you like !
    12 Oct 2012, 03:01 PM Reply Like
  • Funniest thing I've heard in months! I foolishly jumped at AGNC as soon as the ex-dividend occurred because (as in the recent past) it usually recovers quickly. I already averaged down once but that was clearly too soon! Reading everything I can today to try and decide whether to kill it or hang out for some recovery. Guess it's high time for some adversity since I was doing so well for 9 months. Oh well.
    14 Oct 2012, 12:22 PM Reply Like
  • Holding all my mREITs TwistTie.


    Am I helpin or hurtin your wife's birthday ?
    12 Oct 2012, 03:03 PM Reply Like
  • Holding is cool. You just can't come to the party.


    I'm holding AGNC in an account where I primarily need the dividend.


    I'm waiting to buy AGNC in an account where I want to maximize total return.


    Based upon the chart, I'm hoping that the pullback will stop around $31/share.


    That should happen pretty soon at the rate things are going.
    14 Oct 2012, 11:33 AM Reply Like
  • JPMorgan and Wells Fargo ought to focus on their own earnings.
    12 Oct 2012, 03:03 PM Reply Like
  • none of this affects CMO's book. those that are selling it in sympathy to the others are uneducated sellers imo... CMO is completely diff from NLY AGNC ARR and all those other ones
    12 Oct 2012, 03:06 PM Reply Like
  • Maybe time to "Cherry pick" some more?
    12 Oct 2012, 03:08 PM Reply Like
  • I haven't owned any mREITs since September 21st because I believe they are bearish; but QE3 effect gets better understood and the price gets down to an appropriate level, they will be a good buy again.


    12 Oct 2012, 03:21 PM Reply Like
  • Prospects going forward continue dismal. I've been selling. Now only own TWO and NLY. With today's drop they will be worth less than 0.375% of my Traditional IRA brokerage account.
    12 Oct 2012, 03:23 PM Reply Like
  • I bought this stock at $29. I'm hanging in until the Div is 2%
    12 Oct 2012, 03:24 PM Reply Like
  • Oh....that's REALLY smart :-(
    13 Oct 2012, 11:30 AM Reply Like
  • 2 years ago Uncle Ben told us he'd keep rates low for 2 more years. Now he's saying till 2015. The unspoken truth is that he can't tighten. Maybe ever. For bugetary reasons alone. REIT prices will move up and they'll move down. But why would anyone sell given the alternatives. It is always interesting to see the goofy stuff published by seeking alpha. But beware. The barrier to entry is zero. In fact my 83 year old mom, who couldn't spell MBS, could write this stuff. Wanna make yourself ill? Go back and look what a buy and hold and re-invest stradegy would have returned to you instead over the last 5 or 10years. Some are better than others, but the REIT sector is a very good place for safe money that you don't wanat to watch daily.
    12 Oct 2012, 03:25 PM Reply Like
  • Someone may sell because just as quickly as he changed it to 2015, he can change it to 2014. Also, if Romney is elected uncle ben will be unemployed. Then the question becomes, will the fed continue its current policies. If interest rates rise quickly, then there will be little to no spread, thus choking mreits. also, the idea has been floating around to choke freddie and fannie, which would devalue agnc's mbs because they would have no guarantees on their mbs.


    so there is risk involved.
    12 Oct 2012, 04:30 PM Reply Like
  • If Romney does win, you are right. Uncle Ben gets the pink slip. But you can take one thing to the bank. And that is that the Fed CANNOT and WILL NOT tighten. Romney doesn't want the hundreds upon hundreds upon hundreds of billions of new debt added on his watch. The Fed is boxed into a corner. Rates will rise. The administration will do everything in its power to devalue the dollar (while telling us the opposite is their intent). At some point we will have a much steeper yield curve. And that will be very positive for the smarter REITs who see this coming and adjust their hedges accordingly. They'll be able to reduce leverage and maintain a great dividend. But for the very long and forseeable future the cost of funding portfolios will be very very low by historical standards.
    12 Oct 2012, 06:38 PM Reply Like
  • I'll point out that Ben changed something fundamental: up till now Fed had to vote to -continue- QE, Ben changed it so now you need a majority in the Fed to vote to -end- QE.


    So, even if he gets sacked it won't much matter if a majority in the Fed continues to believe in the necessity of QE, which is the case currently. Ben getting fired will not change anything in the short term.
    13 Oct 2012, 07:05 AM Reply Like
  • If Romney is elected, Ben will be unemployed, the printing presses will be shut down, and the Fed's balance sheet will start contracting.
    13 Oct 2012, 08:01 AM Reply Like
  • So how do you come to such conclusions about the future? You seem to know what will happen. You seem to know what Romney will do and exactly what mREITs will do in response, how do you obtain such insight?
    13 Oct 2012, 03:47 PM Reply Like
  • I read the tea leaves in the economic section of the newspaper. :)
    14 Oct 2012, 10:26 AM Reply Like
  • While the comments about continuing to own MReits due to their superior yield makes sense, why hold onto the ones that are selling at historically unsustainable price/book ratios, such as AGNC? Wouldn't one be better off waiting for these names to reprice and then move back in? When distributions are lowered, you'll have a much higher yield if you buy in at the more sustainable value than if you simply hang onto your current holdings, likely bought at the inflated price/book values. My guess is that AGNC will drop into a range that reflects a price/book of between zero and 5%. What's unknown at this point, of course, is "what is the current book value?" I would think that it's increased, but even if you factor that in, AGNC still has a couple of points to lose.
    12 Oct 2012, 03:32 PM Reply Like
  • do your homework, book value is 29.9. How is it possibly trading at an unsustainable p/b????? If anything, that 40b that bernanke is putting into mbs will inflate the value of agnc's holdings. fed is not out to gut mreits, they are putting cash into the system
    12 Oct 2012, 04:34 PM Reply Like
  • Absolutely! What the hell is wrong with you people who are content to watch their paper capital gains go down the toilet?! SELL to grab them, wait till all the dust settles, and buy back in! This is not rocket science!
    13 Oct 2012, 11:39 AM Reply Like
  • Buy low, sell high, get paid to wait. It's time to wade back in. Wake me when it's 2014.
    12 Oct 2012, 03:40 PM Reply Like
  • These comments suggest that there are (at minimum) two broad categories of mREIT investor: those who buy and hold for the yield, and those who believe they can trade to earn a capital gain (as well as enjoy the dividend if they hold long enough). I am in the former camp, and, as such, I concur with several comments that the yield is so much better than any alternative that I will hold long term. My primary concern is anything that could effect the mREIT business model, such as the SEC removing the exclusion from the Investment Company Act. In that case, we are screwed.
    12 Oct 2012, 04:06 PM Reply Like
  • Good points. High yielders (over 10%) carry risks but that is part of the deal. We get paid very well to weather the periodic storms, both regulatory and market.


    Long MTGE and TWO, for the dividends.
    12 Oct 2012, 04:29 PM Reply Like
  • Well, there are things to do: My Pardner and I made a big hit this week on AGNC put options.
    12 Oct 2012, 04:33 PM Reply Like
  • Holding on to mine. Where else can I put that cash that will pay anything near the level , even a slightly reduced yield would pay.
    12 Oct 2012, 04:33 PM Reply Like
  • SELL and BUY BACK!
    13 Oct 2012, 11:40 AM Reply Like
  • They are going to have to sell princple to keep the dividend yields


    So basically sell the furniture to feed the yield hogs
    12 Oct 2012, 05:41 PM Reply Like
  • What they do, shareholders still get 90% of the profit.
    13 Oct 2012, 08:03 AM Reply Like
  • Im more comfortable when these stocks aren't trading near their highs. The main function hasn't been cap gains although I took some on the way up. The main function is income and my mReit holdings are strong, at least for now. As the price goes down the yield is going up. AMTG is now closing in on 16%. They went X a couple weeks ago after raising the dividend $.15/qtr.


    Im certain strong fundamentals and strong dividends will limit the down side and the trading range will be tolerable for long term income holders.
    12 Oct 2012, 06:00 PM Reply Like
  • there is no trend with amtg. they are too new to say they will consistently pay 16% like agnc has consistently paid ~15%. 4 payments vs 16 dividend payments. Which would you say is a better indicator of a trend?
    17 Oct 2012, 12:00 AM Reply Like
  • Fully agree..If someone out there has a better yielding opportunity let me know.
    12 Oct 2012, 06:02 PM Reply Like
  • You have to get in and out with these unless you bought in at $20 and don't mind the ride. I don't hold AGNC for more than 2 weeks. Collect Div and hide for 2 months. Got out at $35. Waiting for $30-31.....
    12 Oct 2012, 06:02 PM Reply Like
  • You are SOOOOOOOOOOOOO right AlbyVA!!! There is no better game in town for income investors!!!! I'll stay with my AGNC thank you!!!!
    12 Oct 2012, 06:03 PM Reply Like
  • looking for suggestions on how to contact the investment heads at MReits directly- I operate a residential construction origination platform and can certainly generate significant yields for anyone willing to step up their risk profiles on owner occupied single family construction loans- the private equity groups are killing it right now!
    12 Oct 2012, 06:39 PM Reply Like
  • i have some mfa and i'm holding onto it.
    i like mcc,mpw,cxs,psec, and nct.
    does anyone else have anything to add to my investments.
    12 Oct 2012, 06:39 PM Reply Like
  • i'm retired and looking for income to live on.
    12 Oct 2012, 06:39 PM Reply Like
  • I own AMTG and REM and am still pondering what to do I get out ? I am normally decisive but this time .....its harder because there are pros and cons for keeping them or dumping them
    12 Oct 2012, 06:40 PM Reply Like
  • I bought mREITS because I wanted great dividends. I figured I could even margin @ 3% and get dividends @ 12%. I put all my buys on a database by Barons and became fascinated as to how much money I was making in stock appreciation. Yesterday SA alerted me to the drubbing mREITS were taking so I panicked and sold everything. When I checked out my income and stock appreciation I found that my capitol gains exceeded my dividends by about 60%. (This may be enhanced due to buying ex dividend to get a lower price.) I am lucky because I am now all in cash and can buy at a lower price and if I am lucky I can hope for a selling climax.


    I am thankful for all who share their thoughts. Y’all are extremely bright and informative.
    12 Oct 2012, 06:49 PM Reply Like
  • Maybe you should be trading in an IRA and protecting all your profits. Sure there is a 10% penalty with early withdraw, but hell, if you make a ton of money, what's a little 10% check to Uncle Sam?
    13 Oct 2012, 08:06 AM Reply Like
  • Now THAT's the way to do it! What's wrong with the rest of you?
    13 Oct 2012, 11:52 AM Reply Like
  • ARR has already announced that the dividend will be 0.09 for Oct, Nov and Dec.
    12 Oct 2012, 06:52 PM Reply Like
  • Does anyone (other than th hedge hogs) know how low AGNC will go before turning. Might pay to sell and buy back when the price is right. Doesn't look good after todays fall.
    13 Oct 2012, 02:01 AM Reply Like
  • mREITs are still good; esp commercial and healthcare.
    13 Oct 2012, 02:48 AM Reply Like
  • I thought mReits were mortgage REITs. What commercial and healthcare are you referring to and what do they yield?


    13 Oct 2012, 08:47 AM Reply Like
  • @ChuckJ. There is a list of REITs by subcategory at the Dividend Detective website. Here's the url
    Good luck.
    14 Oct 2012, 07:20 AM Reply Like
  • Bought NLY and CIM too high. Even with the divi, they're weighing down my small Roth portfolio. Both are ex-dividend, so am getting rid of them, along with ANH (another subject) this week. May buy back when they drop some more. Looks to me like they will. Must-have-patience. Not sure if the dividend is sustainable in this interest environment. Have held for about 3 or 4 years, but still not breaking even. Continuing to drop in price.
    13 Oct 2012, 07:07 PM Reply Like
  • I am in,bought agnc at 28.00, still think it pays better than anything out there.Put a stop on your stock to take your emotions out of it.
    14 Oct 2012, 02:28 AM Reply Like
  • I am a man of 82 years old, I like Arr & nly stock. They pay monthly dividends...New houses are picking up , New mortgage are picking up.
    Mortgages rate are very low,.Economy is picking up.........
    14 Oct 2012, 02:31 AM Reply Like
  • Please read my previous post. I am out now, 'cept for a little bit of the REITs, [and I was their champion], but falling equity, in these scary times, does not sit well with someone who just cut off his income last week; [just retired and sold the Queen], so, I agree with all the positive pro-REIT statements and comments, but I also want to re-enter after the dust settles in this recent blitz of price 'restructuring'. I intend to get higher % returns buy selling higher, (as I have done so far) and re-enter soon. Sure wish I could tell when, perhaps, not til after the election giving up a month or two of dividends, and funding myself for that time. I am getting a nice purse from SS, so it will not be a total drain.


    Capt. Brian
    The Lost Navigator
    15 Oct 2012, 04:54 PM Reply Like
  • I have already commented on this subject and i am hloding my reits because they are still the best capital going!!!!!!
    15 Oct 2012, 05:28 PM Reply Like
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