The recent gyrations in the mortgage REIT sector have knocked down even big players like Annaly Capital Management, Inc. (NYSE:NLY) and American Capital Mortgage Investment Crp (NASDAQ:MTGE), leaving them bruised and battered as investors flee the once-lucrative trusts for something a little less volatile. Annaly Capital Management, Inc. (NYSE:NLY) has just been downgraded to Underperform by Sterne Agee, and American Capital Mortgage Investment Crp (NASDAQ:MTGE)’s Gary Kain was forced to admit that his agency-only trust will experience another drop in book value for the second quarter, after saying earlier that book value was rebounding.
The mREITs aren’t taking this new reality lying down. Several trusts have recently declared dividends that are unchanged from the previous payout period, despite the recent bloodbath. Is this just a desperate bid to hang onto investors, or do these companies have confidence that this storm will pass, leaving them no worse for wear?
In a show of bravado, several mREITs have declared dividends within the past week, with nary a decrease in sight. Capstead Mortgage Corporation (NYSE:CMO) just announced the continuation of its $0.31 per share quarterly dividend, which was upped from $0.30 just this past March. CYS Investments Inc (NYSE:CYS) revealed its intention to raise its own quarterly payout to $0.34 from $0.32 per share earlier this week, and ARMOUR Residential REIT, Inc. (NYSE:ARR) has joined in, keeping its monthly $0.07 per share dividend firmly in place, even into the third quarter.
All these positive vibrations seem to be doing the trick, lifting the sector out of the doldrums, at least momentarily. But, mREITs want more than just a temporary reprieve, and managers have been using public relations opportunities to talk up their businesses and allay investor fears.
Agency-only mREITs especially vulnerable
All mortgage REITs have taken it on the chin lately, but agency players like American Capital Agency Corp. (NASDAQ:AGNC) and ARMOUR Residential REIT, Inc. (NYSE:ARR) have been stung especially hard. In a recent article in the Financial Times, ARMOUR Residential REIT, Inc. (NYSE:ARR) co-CEO Scott Ulm notes that many investors don’t have a firm grasp of how the industry works. He points out that, despite the upheaval in the sector of late, new opportunities for investment are presenting themselves, as prices drop and mortgage bonds become more of a bargain.