Disecting This mREIT: Crexus Investment Corp (CXS)

Annaly Capital Management is America’s largest mortgage REIT. It has been facing a hard time in the wake of the Fed’s all out efforts to keep the short-term rates low and at the same time bring down long-term rates. Annaly has a large concentration in 30-year high coupon fixed rate MBS, which are accelerating its prepayments to 19% under the prevailing challenging macroeconomic environment. This is why the company experienced a 7 basis point decline in its interest rate spread during the fourth quarter. At the end of the third quarter, Annaly reported an over 50 basis point sequential decline in its net interest rate spread. On a positive side, the company reduced its operating expense by 36% over the linked quarter, which provided partial support to the bottom line during the fourth quarter.

Investment Strategy

I have a hold rating for CreXus Investment with a target price of $13.35. I recommend investors hold the stock and benefit from its elevated dividend yield of 9.6%, which the company has been able to increase during the prior year.

The article Disecting This mREIT originally appeared on Fool.com and is written by Adnan Khan.

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