Enhance Your Regular Income By Adding This 12% Yielder: Apollo Residential Mortgage Inc (AMTG), New York Mortgage Trust, Inc. (NYMT)

Comparing the results with New York Mortgage Trust, Inc. (NASDAQ:NYMT), it is worth noting that New York Mortgage reported six folds increase in its fourth quarter interest income and two folds increase in its net interest income overturning the third quarter’s $1.9 million loss to $9.4 million profit. AG Mortgage Investment Trust Inc (NYSE:MITT) reported 28% increase in its fourth quarter interest income, while its interest expense surged 54% sequential. However, this resulted in a 23% increase in the net interest spread for the quarter.

Dividends

The stock offers a dividend yield of 12.35% well above the yield offered by the 10-year Treasuries. Apollo Residential does not have a long track record of dividends, but since the dividend initiation, the company has increased its dividend distributions. Even during the prior year, when mREITs like Annaly Capital Management, Inc. (NYSE:NLY) and ARMOUR Residential REIT, Inc. (NYSE:ARR) were forced to cut their dividends.

Valuations

Apollo Residential reported 5% sequential increase in its book value to $22.49 per share. The stock is currently trading in line with its book value. Compared to this, New York Mortgage Capital and AG Mortgage Investment Trust are trading at 10% and 12% premiums to their respective book values. Therefore, it is clear that compared to the New York Mortgage Trust, Inc. (NASDAQ:NYMT) and AG Mortgage, Apollo Residential is trading at cheap multiples.

Conclusion

Apollo Residential is hybrid mortgage REIT and owns large chunks of Agency residential mortgage backed securities. Due to the presence of the high yielding non-Agency RMBS, Apollo Residential posted higher interest income for the fourth quarter of 2012. However, the net income plunged on higher cost of funds, higher operating expense and lower gain on sale of MBS. The stock offers handsome dividends and attractive valuations. Therefore, I believe it presents investors with an opportunity to enhance their regular income.

The article Enhance Your Regular Income By Adding This 12% Yielder originally appeared on Fool.com and is written by Adnan Khan.

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