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- REM and MORT are among the highest-yielding ETFs, while also offering attractive growth.
- These ETFs, while offering attractive returns, also involve four very serious risks.
- Ultimately, there may be no significant difference between these funds from an investor's perspective.
Update: The 9/17/14 FOMC Statement And Its Possible Ramifications For REM
- The September two-day FOMC statement regarding the direction of interest rates was released on 9/17/14.
- It continued the FOMC policy that interest rates would remain low for a "considerable period" after QE cessation.
- The ten-year interest rate, however, has jumped 32 basis points in just the last month, erasing the year's gain.
- Many mREIT names declined on 9/18/14, confirming my original article's thesis of the relative safety of REM over individual mREIT names.
The Outlook For REM, Its Next Dividend And The mREIT Sector
- My projection for the upcoming REM quarterly dividend to be paid in September is $0.3083.
- The outlook for the mREIT sector and REM depends on whether the Federal Reserve moves to raise short-term interest rates.
- The indicator which will most influence the Federal Reserve's action on interest rates is the unemployment rate. There is some controversy as to whether unemployment rate is flawed.
- The number of men between the ages of 25-54 in the labor force has fallen to the lowest level since the figure was first reported by the government in 1948.
- As long as inflation remains low, mREITs and REM should produce high returns.
REM: Exposure To mREITs Without Having To Choose Just One
- What are mREITs? How do they function? Why should a dividend income investor want exposure to them?
- The basics and constituent parts of REM.
- Why REM ETF is a better choice than any single mREIT company from this REIT class and how REM solves the single biggest problem for the investor in mREITs.
- Three strategies to employ to buy REM ETF, gain dividend income and further strengthen an income portfolio.
- While the future as always is uncertain, dividend income investors should consider the REM ETF for high dividend yield and exposure to mREITs.
- Many investors appear to have been surprised by the reduction in REM's dividend to about $0.30.
- As I explained earlier there was nothing improper about REM's higher dividends but the factors that had caused them are over.
- REM should not fall precipitously because of the dividend cut, since shares can be redeemed by professionals at net asset value, in lots of 50,000.
- REM has been paying a dividend yield around 15%.
- This level of dividends in inconsistent with the yields of funds with similar portfolios.
- My calculation of the next REM dividend suggests a significant decline from recent quarterly dividends.
- REM is still a good way to collect high yields, if you are comfortable with interest rate risks. However, be prepared for a reduction in the dividends in coming quarters.
REM Dividend Cut's Implications For mREIT ETFs And ETNs
My 401(k) - Exchanging A Mutual Fund For ETFs, Part 3
Real Estate and the Danger of the Personal GuaranteeNadav Manham • Sep. 6, 2009
There are no Transcripts on REM.
Wed, Nov. 19, 3:42 PM
- A check of the mortgage REITs following FOMC minutes which shows the discussion moving a bit more seriously towards rate hikes finds the sector (REM -0.5%) modestly lower.
- Individual names: Annaly (NLY -0.3%), American Capital Agency (AGNC), CYS Investments (CYS -0.3%), Invesco Mortgage (IVR -0.9%), New York Mortgage Trust (NYMT -0.4%), Hatteras Financial (HTS -0.8%), MFA Financial (MFA -1%), Capsteam Mortgage (CMO -0.6%), Ellington Residential (EARN -0.4%).
Wed, Nov. 5, 1:27 PM
- The First Trust Emerging Markets Local Currency Bond ETF (NASDAQ:FEMB) is an active fund that seeks to maximize total return and income, while also minimizing volatility, by investing in bonds that are denominated in the issuer's local currency.
- Another active fund, the First Trust Low Duration Mortgage Opportunities ETF (NASDAQ:LMBS) will invest at least 80% of its net assets in investment-grade, mortgage-related debt securities and other mortgage-related instruments in the search of current income for investors.
- "These funds provide a strategy for investors to gain exposure to two fixed income sectors in which we believe in-depth research and analysis, along with ongoing surveillance, can add significant value for investors," said Ryan Issakainen, CFA, Senior Vice President and ETF Strategist at First Trust, in a press release.
- The third fund launched by the group today was the First Trust International IPO ETF (NASDAQ:FPXI), which tracks a basket of the 50 largest and typically most liquid companies that are domiciled outside the U.S. within the IPOX Global Composite Index.
- Other emerging market bond ETFs: EMB, PCY, ELD, EMLC, VWOB, LEMB, EMAG, EBND, EMSH
- Other mortgage REIT ETFs: REM, MORL, MORT
- Other IPO ETFs: FPX, IPO, IPOS
Wed, Oct. 29, 1:43 PM
- Fed purchases of mortgage-backed securities are ending today, but reinvestments are likely to keep a firm bid in the market, says Deutsche's MBS team. The "real risk" to the MBS market won't come until the Fed ends reinvestments - early 2016 at the soonest, and maybe not until 2017.
- QE's end, says the team, leaves the Fed with $1.7T in MBS holdings and private investors with just $3.5T. The Fed's massive holdings - 1/3 of the universal amount, but 1/2 of dollar duration - keep a source of volatility out of the market.
- The end of the Fed as a net buyer will be about the first time since the early 1990s when MBS haven't been getting a bid from either the GSEs, Treasury, or Fed.
- ETFs" REM, MORT, MORL
- Names of interest: Annaly (NLY -1.6%), American Capital Agency (AGNC -2.5%), Armour (ARR -1.2%), Hatteras (HTS -1.6%), CYS Investments (CYS -1.7%)
Fri, Oct. 24, 7:07 AM
- A trend now? JMP Securities' Steve Delaney cashes in his chips on his buy recommendation on AG Mortgage Investment Trust (NYSE:MITT) downgrading to Market Perform and pulling the price target after a big move higher in the stock this year.
- Earlier this week: JMP's Delaney rings the register on American Capital Agency
- The downgrades for both come before they and most of the industry report Q3 results (CYS Investments has already done so).
- ETFs: REM, MORT, MORL
Mon, Oct. 13, 4:19 PM
- Both equity and mortgage REITs saw plenty of buying as nearly all of the rest of the market was lit up bright red, and Treasury ETFs signaled a sharp drop in yields when government bonds reopen for trade tomorrow (closed this session for Columbus Day).
- A sampling of equity names: Senior Housing Properties (SNH +1.2%), Medical Properties Trust (MPW +1.4%), Gramercy Property Trust (GPT +1.7%), Equity Residential (EQR +0.7%), Inland Real Estate (IRC +0.9%), Sovran Self Storage (SSS +1.1%), Highwoods Properties Trust (HIW +1%).
- One equity REIT sector in the red along with the rest of the market is lodging amid worsening Ebola fears: Ashford Hospitality Trust (AHT -2.9%), Sunshine Hotel Investors (SHO -1.4%), LaSalle Hotel Properties (LHO -1.5%), Summit Hotel Properties (INN -1.5%).
- Mortgage REITs: American Capital Agency (AGNC +1.4%), CYS Investments (CYS +2.2%), Invesco (IVR +1.1%), American Capital Mortgage (MTGE +1.5%), Western Asset (WMC +1.1%).
- ETFs: IYR, VNQ, REM, MORL, MORT, DRN, URE, REZ, SRS, RWR, SCHH, ICF, ROOF, DRV, KBWY, RTL, REK, FRI, FTY, PSR, IFNA, FNIO, WREI
Fri, Oct. 10, 11:42 AM
- The FTSE NAREIT All REITs Index gained 13.08 during the year's first nine months, and had a dividend yield of 4.31% as of September 30. The S&P 500 had a total return of 8.34% over the same period, and a dividend yield of 2.06%.
- The big YTD performance comes even after a 2.63% decline in the just-ended Q3 (vs. the S&P's 1.13% decline).
- Apartment REITs (EQR, AVB, ESS, PPS, UDR, to name a few) have been the biggest winner so far this year, with total return of 20.29% In second place at 16.76% are self-storage REITs (PSA, SSS, CUBE, EXR).
- Mortgage REITs (REM, MORT, MORL) had a total return of 12.69%.
- Broad REIT ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, RWR, SCHH, ICF, RWO, IFGL, DRV, KBWY, DRW, REK, FRI, GRI, FTY, FFR, RWXL, PSR, WREI, REET
Thu, Oct. 9, 1:55 PM
- The Fed is nervous higher rates will boost volatility, put a dent in asset (stock and home) prices, and push the U.S. into recession, says Wells Fargo analyst Joel Houck. With the Fed thus trapped from hiking, Houck remains bullish on the mREITs (REM -0.1%), notably American Capital Agency (AGNC +0.7%), CYS Investments (CYS +0.1%), Hatteras Financial (HTS), and Annaly Capital (NLY +0.1%).
- Previously: Mortgage REITs see more gains as averages slide
Thu, Oct. 9, 10:40 AM
- It's been a good week for mortgage REITs (REM +0.7%) which rose on Tuesday as the broad market tumbled and brought yields down with it, rose more on Wednesday, this time alongside a major broad market rally on dovish FOMC minutes, and are on the move higher again today as the averages again head south.
- Down to 2.28% earlier in the session (a 16-month low), the 10-year Treasury yield is now flat on the day at 2.32%.
- This week's strong move comes following a tough September in which the mREITs gave back a nice chunk of their YTD gains.
- Annaly (NLY +1.2%) is up nearly 5% over the last four sessions. American Capital Agency (AGNC +1.5%) is ahead more than 6%.
- Others: Armour (ARR +1%), Chimera (CIM +1%), CYS Investments (CYS +1.2%), New York Mortgage (NYMT +1.3%), Anworth (ANH +0.8%), Dynex (DX +1%), Javelin (JMI +1.5%), Five Oaks (OAKS +0.9%).
- Other ETFs: MORT, MORL
Tue, Oct. 7, 11:12 AM
- Sector giants Annaly Capital (NLY +1.2%) and American Capital Agency (AGNC +1%) are pacing gains in the mortgage REIT sector (REM +0.3%) on a day when the major averages are lower by about 0.75% and the 10-year yield at 2.39% has about erased all of its big post-Labor Day gain.
- Additional ETFs: MORT, MORL
- Among other names, there's CYS Investments (CYS +0.5%) - whose management has been the most publicly skeptical of the higher interest rates meme.
Wed, Oct. 1, 3:02 PM
- Despite a strong period for mortgage REITs ever since the financial crisis, most of the benefits from structural changes to the mortgage market have yet to be realized, says American Capital Agency (AGNC +1.8%) and American Capital Mortgage (MTGE +0.8%) CIO Gary Kain, wrapping up his company's Mortgage REIT day with a look at the future.
- Presentation slides
- Why is this? First, Fed MBS purchases have dwarfed the declines in GSE portfolios; second, the GSEs/FHA still account for the vast majority of new originations; third new non-agency securitization volumes are negligible; fourth GSE credit risk transfers are only beginning to ramp up.
- At some point, there's going to be greater reliance on private capital, says Kain, and he and his team believe it's going to provide significant opportunity in the mREIT (REM +0.6%) space in the intermediate to longer term in the agency, non-agency, and MSR sectors.
- Previous coverage
Tue, Sep. 30, 3:05 PM
- Many in the sector (REM -0.9%) presented today at the JMP Financial Services and Real Estate Conference. Those heard in full by this reporter - CYS Investments (CYS -1.6%), Hatteras Financial (HTS -0.9%), and MFA Financial (MFA -1.3%) - presented nothing alarming, but the sector is nevertheless lit up bright red.
- Other presenters included Capstead Mortgage (CMO -1.2%), Arlington Asset (AI -2.2%), Dynex Capital (DX -1.7%), Invesco (IVR -1.2%), Armour (ARR -2%), New York Mortgage Trust (NYMT -3.2%), Javelin Mortgage (JMI -1.5%), Five Oaks Investment (OAKS -1.9%), and Apollo Residential (AMTG -1.1%).
- Related ETFs: MORT, MORL
- Previously: CYS's Grant not buying hawkish ideas from Fed
- Previously: Hatteras updates on Q3 at conference
- Previously: MFA Financial positions for further housing improvement
Wed, Sep. 24, 10:11 AM| Comment!
Fri, Sep. 19, 3:32 PM
- Leading the mREIT sector (REM +0.2%) higher this session are American Capital Agency (AGNC +1.9%) and American Capital Mortgage (MTGE +1%) after the two maintained their $0.65 per share quarterly payout last night. Neither move should have been a surprise as both comfortably out-earned their dividend last quarter.
- Also maintaining its payout ($0.30 per shares) after the bell yesterday was Annaly Capital (NLY +0.8%).
- The sector is also getting a break from rising rates with the 10-year Treasury yield lower by four basis points to 2.58%
- ETFs: MORT, MORL
Thu, Sep. 18, 1:10 PM
- The entire sector is in the red, but the biggest declines are being seen in the industry giants, about the only spots large investors can move a lot of shares quickly: Annaly Capital (NLY -1.6%), American Capital Agency (AGNC -1.6%).
- Yesterday's FOMC statement may have left in the "considerable period" language, but the committee remains on course to begin a rate hike cycle in less than a year.
- Further, the selloff on the long end of the curve can has reached the sizable stage - the 10-year yield is up 32 basis points in a month, and has now erased about all of the summer's decline. Book values could take a hit (though hedging is likely to ease the pain).
- REM -0.7%
- Other ETFs: MORT, MORL.
- Other names: Armour (ARR -1.3%), Invesco (IVR -0.7%), Hatteras (HTS -3%), Capstead (CMO -0.3%), Western Asset (WMC -0.4%)
Wed, Sep. 17, 2:51 PM
- Another $10B taper this month brings QE to just $5B monthly, an amount the FOMC expects to go down to zero with its next policy meeting. The "dots" shifted somewhat higher - meaning maybe a slightly earlier start to Fed rate hikes and a higher level of Fed Funds at the end of the next few years, with the median forecast being 2.9% at the end of 2016.
- Mortgage REITs (REM +0.2%) have been under pressure in the sessions ahead of the FOMC, and are mostly snoozing through today's news.
- Annaly (NLY -0.1%), American Capital Agency (AGNC +0.1%), CYS Investments (CYS +0.2%), New York Mortgage Trust (NYMT +0.5%), Dynex (DX +0.8%), Ellington Residential (EARN +1.2%), Javelin (JMI +1.3%).
- Previously: FOMC statement and projections lean hawkish
- Previously: Yellen press conference: Falling UE rate still masking labor market weakness
Tue, Sep. 16, 12:27 PM
- Residential mortgage REITs (REM +0.3%) have been under pressure ahead of the FOMC meeting as traders mull the possibility of higher short-term rates in the nearer-than-expected future, and FBR continues to see trading risks thanks a higher chance of something hawkish rather than anything dovish or unchanged coming from the Fed statement (has the FBR team seen the latest from Hilsenrath?).
- For those who want to buy the dip, FBR calls MFA Financial (MFA +1%) a "top choice" thanks to a portfolio comprised 65% of adjustable-rate mortgages.
- Also don't forgot that higher rates alongside an improving economy would be a boost to MFA's high-quality credit book.
- Commercial REITs are a different animal, says FBR, thanks to differences in how they're funded. The group is less susceptible to a rise in short-term rates, and FBR says Blackstone Mortgage Trust (BXMT +0.6%) should actually see improving earnings power alongside higher rates.
- ETFs: MORT, MORL
REM vs. ETF Alternatives
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