Some mREITs, including Western Asset Mortgage Capital (NYSE: WMC), JAVELIN Mortgage Investment (NYSE: JMI) and American Capital Agency (NASDAQ: AGNC), are currently offering unmatched (nearly 20%) dividend yields that an income-oriented investor finds hard to resist. However, not every one of these stocks is a Buy. That’s because of the rising volatility in interest rates and the prolonged uncertainty surrounding the unwinding of QE3. Let’s see which one of them is the best buy.
Given the prolonged uncertainty that surrounds the unwinding of QE3 and the resultant volatility in interest rates, mortgage REITs with the largest exposures in the high yielding non-Agency residential MBS and commercial MBS are best suited, as these securities will provide a cushion to the book value while enhancing earnings potential. Among the three mREITs considered in this article, Western Asset Mortgage is the closest to the criteria, which is why I believe it’s the best bet.
Source: Motley Fool
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