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Bullish Signals At This 12% Yielding mREIT: Invesco Mortgage Capital Inc (IVR), American Capital Mortgage Investment Crp (MTGE), Western Asset Mortgage Capital Corp (WMC)

Invesco Mortgage Capital Inc (NYSE:IVR) reported insider buying, signaling management’s confidence in the company’s future. Let’s dive in and summarize the recent insider buying at Invesco, and compare the company’s performance with that of its peers.

Insider bullishness

Invesco Mortgage Capital Inc (IVR)

Invesco Mortgage Capital reported insider buying by its CEO Richard King. King added 8% to his stake in Invesco Mortgage after he bought $100,000 worth of shares at an average price of $20.52 per share. The CEO increased his stake on Friday, March 8, 2013. Shares of Invesco Mortgage Capital Inc (NYSE:IVR) are currently exchanging hands at $21.05. Therefore, it can be concluded that the CEO’s insight into the company’s future leads him to believe that the shares will appreciate in value. According to Reuters, three other directors of the company have bought 590 shares each since the beginning of the year. This is the extent of insiders’ confidence in the company’s future.

Company business

Invesco Mortgage Capital operates in the United States as a hybrid mortgage REIT. Given the challenging times and the Fed’s repeated commitment to keep interest rates low, hybrid mREITs are expected to outperform. At the end of the fourth quarter, Invesco Mortgage Capital Inc (NYSE:IVR) had large chunks of 30-year fixed rate Agency MBS. Overall, around 69% of the company’s investment portfolio was invested in Agency MBS, followed by 17% of non-Agency MBS. The company also had 11% of its portfolio invested in commercial mortgage backed securities by the end of the fourth quarter. Besides all this, some Agency CMOs form part of its investments. These investments provide diversification within the mortgage REITs sector.


IVR had a solid fourth quarter, as it reported strong earnings. The top line (interest income) grew 3.5% on the increase in interest-yielding assets. However, like most mREITs, Invesco Mortgage Capital Inc (NYSE:IVR) also reported a decline in its average asset yield during the quarter. Finally, 40% growth in other income supported the 7.5% growth in IVR’s fourth quarter bottom line.


Among other mREITs, Western Asset Mortgage Capital Corp (NYSE:WMC) also reported insider buying by its CFO. The CFO purchased over 10,000 shares of the company at an average price of $21.31 per share. WMC is a similar hybrid mREIT with Agency and non-Agency RMBS, and CMO’s in its investment portfolio.  This 17% dividend yielder reported stronger than expected fourth quarter results, as its EPS of $1.05 surpassed expectations by $0.18. Average asset yield increased 7 bps, resulting in a 5 bps expansion in the fourth quarter net interest rate spread for Western Asset Mortgage Capital Corp (NYSE:WMC).