Buy This 9% Yielding mREIT – MFA Financial, Inc. (MFA): Two Harbors Investment Corp (TWO), Invesco Mortgage Capital Inc (IVR)

During the fourth quarter, the company earned 1.17 million in unrealized net gains while it also earned 1.77 million in gain on sale of MBS which provided support to the bottom line. of $15.6 million were incurred, well above the levels of a year ago, causing the of $69.2 million to go down 2% year over year. A $7.5 million excise tax adjustment led the company to report core income of $71.95 million or $0.20 per common share.

Prepayments

A reduction in the prepayment speeds of the company’s Agency MBS trended down the entire portfolio’s prepayments. At the end of the most recent quarter, MFA Financial, Inc. (NYSE:MFA) reported 17.67% as it’s MBS portfolio’s CPR compared to 19% at the end of the third quarter. Besides this, a combination of mortgage amortization and home price appreciation has caused the Loan-to-Value ratio for MFA Financial’s non-Agency MBS to decrease. Going forward, this lower LTV will cause fewer losses.

Dividends

MFA Financial declared a $0.50 special dividend to reflect a portion of taxable income in excess of distributions. It is currently yielding 8.7%, excluding the special dividend $0.30/share above current $0.20/share estimate.

Valuation

MFA Financial, Inc. (NYSE:MFA) is trading at a 3% discount to the recently reported January book value while Two Harbors Investment Corp (NYSE:TWO) is trading at 13% premium, and Invesco Mortgage Capital Inc (NYSE:IVR) is trading in line with its book value. Therefore, MFA Financial appears to be attractively valued compared to its peers.

Conclusion

I recommend investors looking for regular income buy MFA Financial. It increased its interest income during challenging times and going forward you can expect its prepayment speeds to go further down. Therefore, I believe it can produce growth in its bottom line in the coming quarters.

The article Buy This 9% Yielding mREIT originally appeared on Fool.com and is written by Adnan Khan.

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