High Yielding American Capital Agency and Annaly Capital Maintain Safe Haven Appeal
November 08 2011 - 7:16AM
Marketwired
After struggling for most of the summer, shares of high yielding
Mortgage REITs are finally on the upswing as a strong earnings
season and more stable market has restored confidence in the
sector. REITs must pay at least 90 percent of their taxable income
in the form of dividends, and given the strong earnings season
investors are optimistic about future shareholder return. The
Bedford Report examines the outlook for diversified REITs and
provides equity research on American Capital Agency Corporation
(NASDAQ: AGNC) and Annaly Capital Management, Inc. (NYSE: NLY).
Access to the full company reports can be found at:
www.bedfordreport.com/AGNC
www.bedfordreport.com/NLY
REITs were hammered after the SEC announced that it will solicit
public comment to determine if mortgage real estate investment
trusts should be regulated as investment companies and therefore
subject to the Investment Act of 1940. While analysts don't expect
the exemption to be lifted, the SEC review was acting as a cloud
over the industry's future.
Fortunately, this earnings season drew attention away from
potential long term headwinds. Mortgage REITs continued to post
strong numbers as the firms benefitted from favorable interest rate
spreads. Most mREITs earn their money on the spread between
low-interest short-term borrowing and purchasing high-interest
long-term securities. The Federal Reserve has expressed its
intention to keep interest rates low which means that REITs should
enjoy a good spread for the foreseeable future.
The Bedford Report releases stock research on REITs so investors
can stay ahead of the crowd and make the best investment decisions
to maximize their returns. Take a few minutes to register with us
free at www.bedfordreport.com and get exclusive access to our
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As of September 30, 2011, American Capital Agency's investment
portfolio totaled $42.0 billion of agency securities, at fair
value, comprised of $38.3 billion of fixed-rate securities, $3.2
billion of adjustable-rate securities ("ARMs") and $0.5 billion of
collateralized mortgage obligations ("CMOs") backed by fixed and
adjustable-rate securities, including interest-only strips. The
company reported net income for the third quarter of 2011 of $250.4
million, or $1.39 per share, and net book value of $26.90 per
share. Presently AGNC pays an annual dividend of $5.60 for a yield
of around 20.3 percent.
During the quarter ended September 30, 2011, Annaly Capital
Management disposed of $3.9 billion of mortgage-backed securities
and agency debentures, resulting in a realized gain of $91.7
million. The annualized dividend yield on the company's common
stock for the quarter ended September 30, 2011, based on the
September 30, 2011, closing price of $16.63, was 14.43 percent, as
compared to 15.45 percent for the quarter ended September 30, 2010,
and 14.41% for the quarter ended June 30, 2011.
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