Are Mortgage REITs Good Buys Now? (NLY, AGNC, HTS, CMO, IMH)

Well, are they? The Federal Reserve isn't expected to raise interest rates anytime soon, at least 2012 at the earliest, unless the job and housing markets improve drastically over the next 11 months. The yield curve has widened nearly 100 basis points since the Fed announced its $600 billion quantitative easing program, which gives companies like Annaly Capital Management, Inc.

, American Capital Agency Corp.

, Capstead Mortgage Corporation

, Hatteras Financial Corp.

, and IMPAC Mortgage Holdings, Inc

less room to breathe, over the purchases of mortgage backed securities these companies make, but many expect the companies borrowing costs to continue to remain weak. This should allow for earnings to remain relatively stable, given the leverage in the sector (6.1 times as of September 30), and should allow investors to continue to reap those humongous, oversized dividends for at least the next few quarters. Disclosure: no position in names mentioned