Invesco Mortgage Capital Inc. (NYSE:IVR) offers an attractive quarterly dividend of $0.65 per share. Because of the pressure on net interest margins, the company has had to reduce quarterly dividends from the previous $1 per share. However, Invesco Mortgage Capital Inc. (NYSE:IVR) has been able to sustain dividends over the previous six quarters, and in 2012 the company paid $2.60 in dividends, making for a dividend yield of around 12.7%. During the same period, its stock price has grown by nearly 25%. In response to the quantitative easing by the Fed, the company has moved its investment strategy from agency RMBS to non-agency RMBS and commercial mortgage-backed securities (CBMS). At the end of the fourth quarter, the agency RMBS portfolio declined by $604 million, while the non-agency RMBS and CBMS portfolios grew by $534 million and $297 million, respectively. The stock is trading at a price to book ratio of around 1 and is a good choice for income investors.
American Capital Agency Corp. (NASDAQ:AGNC) is an mReit that has an investment portfolio consisting exclusively of single-family residential mortgage pass-through securities, and collateralized mortgage obligations acquired with leverage. It has recently announced a quarterly dividend of $1.25 per share, which is the same as the past four quarters and, over the year, the company has paid a hefty annual dividend of $5 per share. Recently, the company announced comprehensive income of $126 million, or $0.36 per common share, for the fourth quarter and, at the end of the quarter, net book value per common share was $31.64.
Regardless of the quantitative easing measures, the company’s investment strategy and asset selection remained the same, enabling it to sustain an economic return of over 30% in the last four consecutive quarters. The CPR is 1% lower compared to the past quarter’s CPR of 10%, and investors should note that CPR influences the stability and sustainability of earnings, and is also a hallmark of effective risk management. Furthermore, at the end of the fourth quarter, interest spread rates increased to 1.63% compared to 1.42% in the preceding quarter when they were falling for much of the competition. I believe American Capital Agency Corp. (NASDAQ:AGNC) is a must-own for investors seeking solid income.
Chimera Investment Corporation (NYSE:CIM) is a highly avoidable investment at this point in time, despite its large dividend yield. I believe investors should consider selling any shares of the stock that they currently hold. Until we have had a chance to examine the financials, there is a good chance that the dividend is not only an income distribution but a return of capital as well. You can always take a new position in the stock after the financial statements have been published.
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