The company is offering a sustainable dividend yield of 20.3% with the stock price that is expected to report 12.4% appreciation. I believe the dividend rate is sustainable because its prior quarter’s cash dividend coverage ratio comes out to be 1.9 times, which means it had sufficient financial muscle to cover its dividends from its operating cash flows in the past.
Looking at the future, the management at Western Asset Mortgage Capital Corp (NYSE:WMC) expects its net interest income of the second quarter of increase 2.2% it the interest rate increase 50 bps. Since the rates have already gone up, you can expect the company to generate higher returns, making the dividend continuity trouble-free.
Equal concentration of each stock will lead the portfolio to yield 14.5% in dividends. However, the aforementioned portfolio is composed up of stocks that are highly dependent on changes in interest rates. Therefore, this portfolio should be considered as one part of a broader retirement portfolio.
Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Building 14.5% Yields With mREITs originally appeared on Fool.com and is written by Adnan Khan.
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