Checking In: Yield Satisfaction
With everyday of paltry Treasury yields and a dividend yield on the S&P 500 that can only characterized as less than impressive, investors are forced to find new ways to generate income without incurring substantial risk.
Certainly, the same old dividend stocks will help, but it also pays to evaluate some different options. The ETF universe is loaded with such options, one of them being today's “Checking In” candidate, the Market Vectors Mortgage REIT Income ETF (NYSE: MORT).
The Market Vectors Mortgage REIT Income ETF made its debut in mid-August, not the best time to roll out a new ETF, but MORT has accumulated $4.4 million in assets under management. Not bad for two months of work in what has been a tricky market environment.
Average daily volume in MORT is just below 10,300 shares per day. Again, that's decent for a new ETF and with the ETF trading around $22, it implies MORT is seeing roughly $1 million in trading volume per week.
With an expense ratio of 0.4%, MORT is home to 27 stocks, many of which yield-hungry REIT investors are probably already familiar with. The new ETF's top-five holdings are Annaly Capital (NYSE: NLY), American Capital Agency (Nasdaq: AGNC), Chimera Investment (NYSE: CIM), Hatteras Financial (NYSE: HTS) and MFA Financial (NYSE: MFA).
Those are some pretty robust yields right there and they contribute to MORT's jaw-dropping 15.8% 30-day SEC yield. MORT will make quarterly distributions to investors, but shareholders should be advised the ETF could be vulnerable to credit, liquidity and pre-payment risks.
When Van Eck rolled out MORT, it made an interesting point regarding the investment case for the new fund. “If the U.S. government continues to wind down its role in the mortgage market, private financing sources, such as mortgage REITS may play a more pivotal role in the industry,” the firm said.
Acknowledging that the data is limited since MORT is just two months old, the ETF's performance is mixed against other REIT ETFs. It has lagged the performance of other, more established funds, but outpaced one of the other REIT ETFs to have made its debut in 2011.
Overall, this been a terrible environment for financials and MORT has not been immune from that, but the ETF has the look of a winner when mortgage market controversy abates and risk appetite returns in earnest.
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