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Annaly Capital Management, Inc. (NLY), American Capital Agency Corp. (AGNC): mREIT Share Prices are Falling but Do Their Dividends Fill the Gap?

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A combination of falling dividend payouts and concerns about future Federal Reserve policy have hit the shares of highly levered mortgage REITs hard in recent months.

This selling has been compounded in the last few weeks as the yield on US government debt has started to rise back up to realistic levels, which has spurred investors to dump mREIT stocks in favor of the relatively risk free government debt.

Annaly Capital Management, Inc. (NYSE:NLY)

Having said that, one of the best ways to protect a portfolio through any kind of market turbulence is by purchasing securities that offer a high dividend yield to smooth out a portfolio’s total return. There are no other stocks on the market right now that offer a higher dividend yield than mREITs.

So, based on their performance during the last few months, has the total return on these securities been enough to give investors a better total return on their investment than the rest of the market, despite their declining share prices?

Annaly Capital Management, Inc. (NYSE:NLY)

Date 3Q 2012 4Q 2012 1Q 2013 2Q 2013 Current Gain/Loss Percentage change
Share price $17.11 $16.90 $14.60 $15.70 $13.50 -$3.61 -21.10%
Dividend $0.55 $0.50 $0.45 $0.45 $1.95 11.40%

First is Annaly Capital Management, Inc. (NYSE:NLY), which has seen its stock price decline 21.1% during the last four quarters. In the same period, the company paid out $1.95 per share in dividends, or a return of 11.4% on the original investment.

Dollar value Percentage change
Total return -$1.66 -9.70%

Unfortunately, Annaly Capital Management, Inc. (NYSE:NLY)’s healthy dividend payout was not enough to offset its share price decline, and investors have lost out by $1.66 per share, or 9.7% during the last four quarters.

American Capital Agency Corp. (NASDAQ:AGNC)

Date 3Q 2012 4Q 2012 1Q 2013 2Q 2013 Current Gain/Loss Percentage change
Share price $33.60 $35.15 $31.15 $33.20 $25.56 -$8.04 -23.93%
Dividend $1.25 $0.00 $1.25 $1.25 $3.75 11.16%

Next is American Capital Agency Corp. (NASDAQ:AGNC), which has also seen its share price decline more than 20% during the past year, while investors have received dividend payouts totalling 11.2% of their original investment.

Dollar value Percentage change
Total return -$4.29 -12.77%

Once again, despite its healthy dividend payout, American Capital Agency Corp. (NASDAQ:AGNC)’s total return is not positive, and the declining share price has wiped out all of the returns investors have received from the dividends. However, the large dividend payout has halved the losses investors would have suffered if there was no payout.

Chimera Investment Corporation (NYSE:CIM)

Date 3Q 2012 4Q 2012 1Q 2013 2Q 2013 Current Gain/Loss Percentage change
Share price $2.51 $2.74 $2.69 $3.26 $3.10 $0.59 23.51%
Dividend $0.09 $0.09 $0.09 $0.09 $0.36 14.34%
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