Invesco Mortgage Capital Inc (IVR), ARMOUR Residential REIT, Inc. (ARR): This mREIT Offers Double-Digit Yield

According to a Wall Street article, bought and resold homes in California have risen to their peak since 2005. MFA Financial, Inc. (NYSE:MFA) will greatly benefit from the rise of the California housing market. This will fuel MFA Financial, Inc. (NYSE:MFA) shares growth and help maintain its high dividend yield. For this year, shares of MFA Financial, Inc. (NYSE:MFA) posted positive returns year-to-date.

The King of the Jungle

But at the current price level, it is already cheap. This makes it quite attractive and a good investment opportunity to secure a position in a high-yielding dividend stock. Annaly Capital Management, Inc. (NYSE:NLY) is quite aggressive in expanding its asset portfolio to improve its profitability. But as a defensive stance, this is very risky considering the high volatility of the REIT industry.

Summary

Among the above companies, ARMOUR Residential has the highest dividend yield, but the risk is also high. This is due to its declining annualized dividend on top of shrinking share prices. However, the industry outlook fueled by rising bond yields offers a gleam of hope for the company. There is the potential that it will eventually stop cutting dividends and start increasing them instead.

A safer investment is Invesco Mortgage Capital, which also has a high dividend yield of 14%. The risk is reduced when it spreads its asset portfolio into Agency and non-Agency MBS. The company also has Agency residential mortgage-backed securities (Agency RMBS). These are securities for which a federally-chartered firm or the US government agency guarantees the payment of interest and principal. These are more secured properties that further strengthen the stability of the company. The firm has commercial MBS, as well.

On May 6, 2013, Ladenburg Thalmann upgraded the stock from neutral to buy. At present, three analyst firms are recommending a strong buy, while three others advise a buy. However, five firms put the rating at hold; none advise a sell. This further implies that now is probably the best time to invest in a high yielding dividend stock like Invesco Mortgage Capital.

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

The article This mREIT Offers Double-Digit Yield originally appeared on Fool.com is written by Nur Tarkak.

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