Are Your Dividends Sustainable? – ARMOUR Residential REIT, Inc. (ARR), CYS Investments Inc (CYS), and More

AG Mortgage Investment Trust Inc (NYSE:MITT)

AG Mortgage Investment Trust ) is another hybrid mortgage REIT that invests in a variety of mortgage backed securities. The company declared a quarterly dividend of $0.8 per common share, in line with the previous dividend. AG Mortgage Investment Trust reported 28% increase in its fourth quarter interest income while at the same time it reported 54% sequential increase in its interest expense. This resulted in an increase in net interest spread of 23%. The stock is trading at 13% premium to its book value and yielding 12.12%.

Anworth Mortgage Asset Corporation (NYSE:ANH)

Anworth Mortgage Asset also declared its quarterly dividend in line with the previous dividend. Traditionally, the company had a concentration in adjustable rate mortgages (ARMs). At the end of the fourth quarter, 45% of its investment portfolio was adjustable rate Agency MBS with 2-5 years reset period. This is down from 51% at the end of the third quarter. The 15-year and 30-year fixed rate Agency MBS were 48% and 4%, respectively. During the fourth quarter, the company generated 2.92% yield on its assets, down 12 bps from the linked quarter. The company reported $45.1 billion in net income, down 16% from a year ago. The stock is currently trading at 15% discount to its book value and yielding 10%.

Conclusion

It is clear that most of the pure play mortgage REITs were forced to cut their shareholder distributions, while hybrid REITs declared dividends in line with their previous distributions. A hybrid mortgage REIT includes in its portfolio commercial mortgage backed securities and high yielding non-Agency residential mortgage backed securities. Therefore, I recommend investors buy hybrid REITs to enhance their regular income.

The article Are Your Dividends Sustainable? originally appeared on Fool.com and is written by Adnan Khan.

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