When investing in mortgage real estate investment trust (REIT) it is important to know that these funds hold a five-year average dividend yield of 10.8%. Mortgage REITs generate higher returns over a three-year period than a 10-year period, generating annualized returns of 10.3% and 8.2%, respectively.
Unless a mortgage REIT issues new debt or raises its dividends, the book value or market price should remain unchanged. This is because mortgage REITs do not own property, rather they directly or indirectly loan their money to real estate operators or owners, and generate revenues through the interest collected.
Essentially, if a mortgage REIT is trading below its book value without reason, this may be an excellent opportunity to buy low and sell high when it returns to book value.
Invesco Mortgage Capital Inc. (NYSE: IVR) is offering a dividend yield of 24.25% or $2.60 per share annually, utilizing quarterly payments, with an inconsistent track record of increasing its dividends.
Invesco Mortgage Capital is a real estate investment trust that invests, finances and manages residential and commercial mortgage-backed securities and mortgage loans.
Invesco Mortgage Capital holds a book value estimated to be in the range of $15.59 to $16.23 per share as of August 31, 2022. The mortgage REIT has a total investment portfolio of $4.9 billion, including $4.7 billion of agency (RMBS) and $145 million to be announced in securities forward contracts.
Angel Oak Mortgage Inc. (NYSE: AOMR) is offering a dividend yield of 19.54% or $1.80 per share annually, conducting quarterly payments, with a track record of increasing its dividends once in the past year.
Angel Oak Mortgage is a real estate finance company focused on acquiring and investing in the first lien non-qualified mortgage loans and other mortgage-related assets in the U.S. mortgage market.
During second-quarter earnings, Angel Oak reported that its GAAP book value of $14.73 per share as of June 30, 2022, was down from $16.80 per share as of March 31, 2022. Angel Oak’s target assets now total $3.2 billion, while holding residential mortgage whole loans with a fair value of $1.3 billion as of June 30, 2022.
Western Asset Mortgage Capital Corp (NYSE: WMC) is offering a dividend yield of 16.08% or $1.60 per share annually, conducting quarterly payments, with an infrequent track record of increasing its dividend payments.
Western Asset Mortgage is a specialty financial REIT company managing a diversified mortgage-market investment portfolio. The firm’s strategy is investing, financing and managing primarily residential mortgage-backed securities, while its core strategy is on agency residential mortgage-backed securities (RMBS).
In its second-quarter earnings, Western Asset Mortgage had a GAAP book value per share of $23.23 as of June 30, 2022. For the three months ended June 30, 2022, the firm repurchased $7.2 million aggregate principal amount of its 6.75% Convertible Senior Unsecured Notes due in 2022.
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