The iShares Trust iShares Mortgage Real Estate ETF REM has 50 holdings diversified evenly across small, mid, and large-cap equities, also allocating less than half of its assets to the financial services sector. The iShares Mortgage ETF is down nearly 31% year-to-date, as rising mortgage rates cratered the market price of real estate firms.
Mortgage real estate investment trusts (REITs) tout the highest average five-year dividend yield of 10.8%, out of any REIT sector. Which is why you may want to invest in a mortgage REIT (mREIT) with a yield higher than the average.
Since both of these mortgage REITs are trading at a discount to their book value, it may be an interesting swing trade to buy a beat-down real estate investment trust.
Also Read: Looking For Double-Digit Returns? 3 Mortgage REITs You Can Buy For Less Than They're Worth — By This Measure
PennyMac Mortgage Investment Trust PMT is offering a dividend yield of 13.50% or $1.88 per share annually, using quarterly payments, with an infrequent track record of increasing its dividend payments. PennyMac Mortgage is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets.
PennyMac’s Chairman and CEO David Spector commented in the third quarter press release that, “Meaningful income contributions from both of our production and servicing segments led to an annualized return on equity of 16% and growth in book value per share, despite mortgage rates climbing to their highest levels in more than a decade.” PennyMac’s book value per share increased to $68.26 per share from $65.38 per share on June 30, 2022.
Chimera Investment Corporation CIM is offering a dividend yield of 13.59% or 92 cents per share annually, through quarterly payments, with an inconsistent track record of increasing its dividends. Chimera Investment is a real estate investment trust engaged in investing in a portfolio of mortgage assets on a leveraged basis.
Since its inception, Chimera has distributed over $5.8 billion to its shareholders and has total assets of over $14 billion as of June 30, 2022. Chimera has a GAAP book value of $8.82 per share as of June 30, 2022.
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