Which REIT is Right?: Hatteras Financial Corp. (HTS) or CYS Investments Inc (CYS)

In comparison, American Capital Agency reported 10% CPR for its investment portfolio, while the CPR for CYS Investments at the end of the most recent quarter was 17.6%. American Capital’s CPR increased from 9%, while CYS Investment’s CPR increased from 17.3% in the linked quarter.

Book Value

Hatteras Financial reported 4.76% decline in its book value to $28.19 per share at the end of the fourth quarter of 2012. In comparison, American Capital Agency’s book value decreased 2.6%, while CYS Investment reported an 8% decline in its book value on lower asset prices.

Conclusion

I recommend investors hold Hatteras Financials and benefit from its elevated dividends. I believe the stock has little capital appreciation to offer and the prevailing challenging macroeconomic environment will continue to compress spreads. Within the mortgage REITs, I continue to favour Hybrid REITs, while AGNC’s prepayment protected portfolio presents an investment opportunity too.

The article Which REIT is Right? originally appeared on Fool.com and is written by Adnan Khan.

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