What To Expect From Your mREIT When It Reports 4Q: Invesco Mortgage Capital Inc (IVR), American Capital Agency Corp. (AGNC)

Page 1 of 3

Invesco Mortgage Capital Inc (NYSE:IVR) operates as a well diversified mortgage REIT with a market cap of around $2.5 billion. The company invests in both residential and commercial mortgage backed securities to provide higher risk adjusted returns to its investors through both dividends and capital appreciation.  The MBS portfolio that the company is invested in is financed by short-term borrowings (repurchase agreements). The company has a large concentration in Agency residential MBS, while a small proportion of non-Agency residential MBS also exist. The company is also invested in residential and commercial loans. Invesco yields 12.24%, while 10-year Treasuries are yielding only 2%.

Invesco Mortgage Capital Inc (NYSE:IVR)Competition

Within the mortgage REITs sector, Annaly Capital Management, Inc. (NYSE:NLY) happens to be a competitor of Invesco. Annaly employs the same leverage as Invesco does; however, Annaly is exclusively invested in longer duration Agency residential mortgage backed securities with higher coupons and prepayments speeds. In order to diversify its portfolio under the current challenging macroeconomic environment, Annaly is in aggressive pursuit of another mortgage REIT (CreXus Investments) that invests in commercial MBS. Annaly currently offers a dividend yield of 12%, and is up 6% since the beginning of this year.

In contrast, American Capital Agency Corp. (NASDAQ:AGNC), another mortgage REIT that employs 7.3 times leverage, is considered to have a MBS portfolio with prepayment protected attributes. The company is exclusively invested in Agency residential mortgage; however, it prefers HARP MBS with low loan balances and shorter durations. These characteristics reduce the repayment speeds. The stock offers a dividend yield of 15.9%, and is up 9% since the beginning of the year.

ARMOUR Residential REIT, Inc. (NYSE:ARR) is a similar pure play mortgage REIT that invests in Agency fixed rate securities and ARMs despite the fact that its charter allows for the addition of non-Agency securities. The stock is up 11% since the beginning of the year and yields 13.4%. The company employs 8.9 times leverage and was forced to cut its monthly dividends in 2012.

AG Mortgage Investment Trust Inc (NYSE:MITT) is a hybrid mortgage REIT that invests in Agency MBS, Non-Agency RMBS and Commercial MBS. Its well diversified portfolio contains 87% of Agency RMBS, followed by 10% of non-Agency MBS and 3% of Commercial MBS. I am bullish on the stock due to its attractive relative valuations coupled with a diversified asset mix, enhancing its dividend paying ability. The stock has increased its quarterly dividend twice during the prior year and is currently yielding 12.5%. The stock is up 9% since the beginning of this year.

Recent Quarter’s Earnings

Invesco Mortgage surprised the Street when it reported its fourth quarter earnings on Feb. 5, 2012. The bottom line of $0.77 per share remained $0.12 per share ahead of the consensus mean estimate. This is a positive surprise of 18.5%, which was 16.6% better than the prior year’s bottom line. Compared to the linked quarter, the company’s fourth quarter EPS advanced 7%. Higher allocation to credit assets remained the company’s top priority during the fourth quarter, which is why Invesco maintained a stable dividend through 2012.

Page 1 of 3
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!