Mortgage REITs May Be Safe to Buy
You have to know this business well to succeed at it, and you'd better be a good number cruncher. When it comes to the commercial side of the business that's even truer and that's one reason AnnalyCapital, May 23, completed its acquisition of and merger with CreXus Investment.
CreXus acquires, manages and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, commercial real property, commercial mortgage-backed securities and other commercial and residential real estate-related assets. CreXus will be renamed Annaly Commercial Real Estate Group following the merger.
Again, don't take my word for it, just because AnnalyCapital is paying a dividend yield-to-price of more than 13%. Don't be too overwhelmed that the chairman and CEO of AnnalyCapital, Ms. Wellington Denahan-Norris owns more than one million shares as of May 8, and her predecessor's estate still owns more than 2.7 million shares.
Do keep in mind that the shares of companies like AnnalyCapital are trading close to its 52-week low. So are its competitors like Invesco Mortgage Capital InvescoMortgage (IVR). You can read TheStreet's rating and opinion of IVR then judge for yourself if now is a good time to begin accumulating shares of yet another dividend that yields around 13%.A less well-known mortgage REIT happens to be one I recently featured in an article. WesternAssetMortgage (WMC) is currently is yielding close to 20%. That's not a misprint and should rivet your attention for awhile longer. WMC is managed by Western Asset Management Company, a global leader in diversified fixed-income management since 1971. As of March 31, the firm had approximately $459.4 billion in assets under management.
This number included $58.3 billion in total mortgage exposure, of which $39.2 billion was invested in agency RMBS (residential mortgage-backed securities), $8.8 billion in non-agency RMBS, $1.3 billion in CMBS, and $8.8 billion in ABS. This fits with its "core investment strategy" which is to be focused on agency RMBS.
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