Arlington Asset Investment Corp (AI), Two Harbors Investment Corp (TWO): This High-Yielding REIT Has Soared Along With the Housing Market

The first quarter performance for MFA Financial was strong, generating net income of $289.89 million, or $0.81 diluted earnings per share. The main strategy of MFA Financial is to pinpoint the best investment opportunities within the residential MBS universe. Since 2000, it has yielded 17.3% annual return and 727.8% total return. The management sees better months ahead amid the rising rentals in multifamily units, minimal mortgage rates, and limited housing supply. These factors will help support price appreciation on a nationwide scale.

Market outlook

On July 18, Moody’s eased off the threat of lowering its U.S. rating, actually affirming that the U.S. economy is improving by giving it a triple-A rating. An improved economy will greatly benefit the housing market, and this will also help support the upward trend of REITs and Arlington Asset Investment Corp (NYSE:AI).

Despite that, there are still many challenges facing REITs today amid rising interest rates. REITs were pulled down last May as a result of the eventual phase out of the quantitative easing program of the U.S. Central Bank. This caused panic among many investors, compelling many of them to leave the sector. But since June 24, panic started to subside and some investors started to return to the sector, helping REITs outperform the broader market.

The managing director at Fitch Ratings, Steven Marks, shared some insights on the newly-published Fitch mid-year review of the REIT market. The review concluded that the overall REIT sector is relatively stable. This conclusion was based on several factors that include strong liquidity, excellent access to capital, and improving fundamentals among many REIT firms.

The bottom line

While REITs stumbled during the second quarter, the fundamentals remained strong and many REITs continued to be profitable while short-term rates are still low. The recent retreat provided a good chance for new investors to hop in. Arlington Asset Investment Corp (NYSE:AI) has great potential to benefit along with a strengthening housing market in the U.S.

The article This High-Yielding REIT Has Soared Along With the Housing Market originally appeared on Fool.com and is written by Emmanuel Floriann.

Emmanuel Floriann Magto has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Emmanuel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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