Invesco Mortgage Capital Inc (IVR), MFA Financial, Inc. (MFA), Annaly Capital Management, Inc. (NLY): Chasing Mortgage REITs’ Yields

Another hybrid

MFA Financial, Inc. (NYSE:MFA) offers a dividend yield of 10.50% on its quarterly dividend rate of $0.22 per common share, which stayed in line with the first quarter’s dividend rate. MFA Financial is classified as a hybrid REIT with around 25% of its equity invested in the Agency RMBS. So, MFA Financial only has to worry about the decline in the book value of 25% of its equity, while it will enjoy the elevated yields from 75% of its equity of non-Agency MBS.

Besides, MFA Financial, Inc. (NYSE:MFA) has a large concentration in the California region’s residential MBS. The California region has shown improvements in its housing markets, with home prices increase higher than other regions. These higher home prices will further bring stability in the MBS yields that the company holds.

Conclusion

It is clear that the hybrids have been able to maintain their shareholder distributions during the current volatile times. However, going forward, all three companies considered in the investment thesis are expected to maintain their current dividend rates, while only Invesco Mortgage Capital Inc (NYSE:IVR) is expected to significantly decrease in book value.

The article Chasing Mortgage REITs’ Yields originally appeared on Fool.com and is written by Adnan Khan.

Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Adnan 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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