Up to date on March twenty eighth, 2025 by Bob Ciura
Mortgage Actual Property Funding Trusts (i.e., “REITs”) – also known as “mREITs” – can present a really enticing supply of earnings for buyers.
It’s because they spend money on mortgages which are sometimes backed by onerous property (business and/or residential actual property) with pretty conservative loan-to-value ratios.
Mortgage REITs finance these portfolios with a mix of fairness (that they increase by promoting shares to buyers) and debt that they often increase at an curiosity price that’s meaningfully decrease than the rates of interest they’ll command on their actual property mortgage investments.
The result’s important and secure money stream for the mREIT.
You may obtain your free 200+ REIT checklist (together with necessary monetary metrics like dividend yields and payout ratios) by clicking on the hyperlink beneath:
Furthermore, as REITs they’re exempt from having to pay company taxes on their internet curiosity earnings and are required to pay out at the least 90% of their taxable earnings to shareholders by way of dividends.
This typically implies that mREIT shareholders earn very excessive dividend yields, making mREIT shares an distinctive supply of passive earnings.
In fact, because of their important quantity of leverage, mortgage REITs include dangers that sometimes result in dividend cuts.
Consequently, buyers must be prudent when deciding on which mREITs to spend money on.
This text will checklist the 5 highest yielding mortgage REITs within the Certain Evaluation Analysis Database.
Desk of Contents
You may immediately leap to any particular part of the article through the use of the hyperlinks beneath:
#5: AGNC Funding Company (AGNC)
American Capital Company Corp is a mortgage actual property funding belief that invests primarily in company mortgage–backed securities (or MBS) on a leveraged foundation.
The agency’s asset portfolio is comprised of residential mortgage go–by means of securities, collateralized mortgage obligations (or CMO), and non–company MBS. Many of those are assured by authorities–sponsored enterprises.
Supply: Investor Presentation
AGNC Funding Corp. reported sturdy monetary outcomes for the third quarter ended September 30, 2024. The corporate achieved a complete earnings of $0.63 per widespread share, pushed by a internet earnings of $0.39 and different complete earnings of $0.24 from marked-to-market investments.
Internet unfold and greenback roll earnings contributed $0.43 per share. The tangible internet e-book worth elevated by $0.42 per share to $8.82, reflecting a 5.0% development from the earlier quarter.
AGNC declared dividends of $0.36 per share, leading to a 9.3% financial return on tangible widespread fairness, which incorporates each dividends and the rise in internet e-book worth.
Click on right here to obtain our most up-to-date Certain Evaluation report on AGNC Funding Corp (AGNC) (preview of web page 1 of three proven beneath):
#4: Dynex Capital (DX)
Dynex Capital invests in mortgage–backed securities (MBS) on a leveraged foundation in america. It invests in company and non–company MBS consisting of residential MBS, business MBS (CMBS), and CMBS curiosity–solely securities.
Supply: Investor Presentation
Dynex Capital launched its fourth-quarter 2024 monetary outcomes, with e-book worth ending the quarter at $12.70 per share and an financial return of seven.4% for the yr.
Leverage elevated barely to 7.9x as the corporate deployed capital into higher-yielding company RMBS, significantly 30-year 4.5%, 5%, and 5.5% coupons.
The shift from treasury futures to rate of interest swaps was a key technique, enhancing portfolio returns by 200 to 300 foundation factors and enhancing internet curiosity unfold.
Click on right here to obtain our most up-to-date Certain Evaluation report on DX (preview of web page 1 of three proven beneath):
#3: Ellington Credit score Co. (EARN)
Ellington Credit score Co. acquires, invests in, and manages residential mortgage and actual property associated property. Ellington focuses totally on residential mortgage-backed securities, particularly these backed by a U.S. Authorities company or U.S. authorities–sponsored enterprise.
Company MBS are created and backed by authorities companies or enterprises, whereas non-agency MBS are not assured by the federal government.
On March twelfth, 2025, Ellington Residential reported its fourth quarter outcomes for the interval ending December 31, 2024. The corporate generated a internet lack of $(2.0) million, or $(0.07) per share.
Ellington achieved adjusted distributable earnings of $7.8 million within the quarter, resulting in adjusted earnings of $0.27 per share, which lined the dividend paid within the interval.
Ellington’s internet curiosity margin was 5.07% general. At quarter finish, Ellington had $31.8 million of money and money equivalents, and $79 million of different unencumbered property.
Click on right here to obtain our most up-to-date Certain Evaluation report on EARN (preview of web page 1 of three proven beneath):
#2: ARMOUR Residential REIT (ARR)
ARMOUR Residential invests in residential mortgage-backed securities that embrace U.S. Authorities-sponsored entities (GSE) corresponding to Fannie Mae and Freddie Mac.
It additionally consists of Ginnie Mae, the Authorities Nationwide Mortgage Administration’s issued or assured securities backed by fixed-rate, hybrid adjustable-rate, and adjustable-rate dwelling loans.
Unsecured notes and bonds issued by the GSE and the US Treasury, cash market devices, and non-GSE or authorities agency-backed securities are examples of different kinds of investments.
ARMOUR’s money stream has been risky since its inception in 2008, however that is to be anticipated with all mREITs. Of late, declining spreads have damage earnings, resulting in a pointy decline in money stream per share.
Fortuitously, ARMOUR is now seeing a measure of restoration, and will proceed to see that restoration present itself within the coming quarters and years.
Click on right here to obtain our most up-to-date Certain Evaluation report on ARMOUR Residential REIT Inc (ARR) (preview of web page 1 of three proven beneath):
#1: Orchid Island Capital, Inc. (ORC)
Orchid Island Capital, Inc. is an mREIT that’s externally managed by Bimini Advisors LLC and focuses on investing in residential mortgage-backed securities (RMBS), together with pass-through and structured company RMBSs.
These monetary devices generate money stream primarily based on residential loans corresponding to mortgages, subprime, and home-equity loans.
Within the fourth quarter of 2024, Orchid Island Capital, Inc. reported a internet earnings of $0.07 per share, a lower from $0.24 per share within the earlier quarter. The corporate’s e-book worth declined from $8.40 on the finish of the third quarter to $8.09 at year-end.
As of December 31, 2024, Orchid Island Capital’s portfolio consisted of roughly $4.2 billion in residential mortgage-backed securities (RMBS), with a internet weighted common coupon of three.5%. The corporate’s leverage ratio stood at 8.1 occasions, reflecting its technique of using leverage to reinforce returns.
Click on right here to obtain our most up-to-date Certain Evaluation report on Orchid Island Capital, Inc. (ORC) (preview of web page 1 of three proven beneath):
Conclusion
As you possibly can see from the dividend yields provided by the ten shares mentioned on this article, mREITs might be highly effective passive earnings turbines.
Nevertheless, buyers must be cautious earlier than investing on this sector, on condition that dividend cuts might be widespread in periods of financial stress. Consequently, diversification and a concentrate on high quality are important.
Extra Studying
You may see extra high-quality dividend shares within the following Certain Dividend databases, every primarily based on lengthy streaks of steadily rising dividend funds:
Alternatively, one other great spot to search for high-quality enterprise is contained in the portfolios of extremely profitable buyers.
By analyzing the portfolios of legendary buyers working multi-billion greenback funding portfolios, we’re in a position to not directly profit from their million-dollar analysis budgets and private investing experience.
To that finish, Certain Dividend has created the next two articles:
You may additionally be trying to create a extremely custom-made dividend earnings stream to pay for all times’s bills.
The next lists present helpful data on excessive dividend shares and shares that pay month-to-month dividends:
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