From Dividend Channel, here is a ranking of the
Top 10 High Yield Mortgage REITs in Today’s Market:
#10. AG Mortgage Investment Trust Inc (NYSE:MITT) — 11.9% YIELD (market cap, in millions: $373)
#9. Two Harbors Investment Corp (NYSE:TWO) — 13.8% YIELD (market cap: $3,241)
#8. Arbor Realty Trust Inc (NYSE:ABR) — 7.0% YIELD ($160)
#7. Pennymac Mortgage Investment Trust (NYSE:PMT) — 10.2% YIELD ($891)
#6. Dynex Capital, Inc. (NYSE:DX) — 11.1% YIELD ($568)
#5. Capstead Mortgage Corp. (NYSE:CMO) — 11.2% YIELD ($1,415)
#4. MFA Financial, Inc. (NYSE:MFA) — 11.2% YIELD ($2,928)
#3. Northstar Realty Finance Corp (NYSE:NRF) — 10.9% YIELD ($791)
#2. New York Mortgage Trust Inc (NASDAQ:NYMT) — 15.7% YIELD ($155)
#1. CreXus Investment Corp (NYSE:CXS) — 10.5% YIELD ($792)
There are a few things to bear in mind. First, this ranking is based on a variety of factors, not simply highest market cap or highest yield. (For a list of the “largest” mortgage REITs, see our previous Top 10.) Mortgage REITs–investing in the instruments financing real estate, rather than the real estate itself–come with their own unique risks and opportunities.
Some analysts have suggested mortgage REITs carry more risk than equity REITs because of their susceptibility to interest rates and (in many cases) the performance of the GSEs. The high yields seen in the above trusts are really a product of high volatility, so that old truism of the investment world–that high profits are attended by elevated risk–holds true. Remember when the mortgage-backed securities markets dried up at the beginning of the recession? Mortgage REITs were not immune to that.
But like equity REITs, mortgage REITs attempt to strike a balance between stability and opportunity. If you look at the graph below, courtesy of Forbes, you can see the spread of REIT capital by asset class:
Though a few sectors dominate, it’s clear that the REIT industry overall is keeping its investments pretty well diversified. This is the case for many mortgage REITs, too. Northstar Realty, for instance, holds debt attached to office, industrial, retail, and healthcare properties. For this reason, we can conclude the authors of this list, over at Dividend Channel, took the mortgage REITs’ portfolio diversity into account.