These 2 Mortgage REITs Have Yields Higher Than 15% And Are Trading Below Book Value

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Zinger Key Points
  • Over the past three years, mortgage REITs saw annualized returns of 10.3%.
  • AG Mortgage Investment Trust is offering a dividend yield of 21.59% or 84 cents per share annually, using quarterly payments.

When investing in mortgage real estate investment trusts, one advantage investors should know about is that they typically have higher yields than equity REITs, and should never trade at a premium to their book value more than the dividend yield. Mortgage REITs typically earn income through the interest on their mortgages, and may be exposed to higher credit risk based on the investment.

Over the past three years, mortgage REITs saw annualized returns of 10.3%, and tend to perform better than equity REITs during times of rising interest rates. This is because during times of rising interest rates the cost of capital increases, which may influence equity REITs to dilute shareholders by issuing more equity through common stock.

Furthermore, mortgage REITs have the ability to issue new debt through senior secured notes without having to issue new equity.

Here are two mortgage REITs with high yields trading below their book value.

AG Mortgage Investment Trust Inc. MITT is offering a dividend yield of 21.59% or 84 cents per share annually, using quarterly payments, with an inconsistent track record of increasing its dividends. AG Mortgage Investment is a mortgage REIT focused on investing in, acquiring and managing a diversified portfolio of residential mortgage assets, other real estate-related securities, and financial assets, which the company refers to as its target assets.

As of June 30, 2022, AG Mortgage had a book value of $11.48 compared to a book value of $13.37 as of March 31, 2022.

"The negative impact to our book value this quarter was driven by mark-to-market unrealized losses on our warehoused loan portfolio as a result of historically wide spreads. However, this challenging market environment also provides us with an improved investment opportunity which we are well positioned to take advantage of," said David Roberts, Chief Executive Officer.

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Two Harbors Investment Corp. TWO is offering a dividend yield of 21.35% or 68 cents per share annually, making quarterly payments, with a track record of increasing its dividends once in the past year. Two Harbors Investment is a real estate investment trust primarily focused on investing in, financing, and managing residential mortgage-backed securities, residential mortgage loans, mortgage servicing rights and commercial real estate.

“​​As mortgage spreads continued to widen to historically attractive levels, we deployed capital into residential mortgage backed securities and took advantage of relative value opportunities across the stack,” stated Bill Greenberg, Two Harbors’ President, CEO and CIO.

On Sept. 21, Two Harbors Board of Directors approved a 1-for-4 reverse stock split of the company’s common stock, which essentially means merging four existing shares into one.
In the second quarter, Two Harbors had a book value of $5.10 per common share, representing a 4.7% quarterly return on book value.

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Posted In: Long IdeasNewsPenny StocksREITDividendsDividendsSmall CapManagementEventsTrading IdeasReal EstateHigh Yielding Mortgage REITSHigh Yielding REITsREITS With Double Digit Yields
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