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 Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

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!