This preferred stock has come into buy range. I looked into it a week ago and it was a few cents away from what I thought a buy was. It has an 8% dividend yield with almost two years of call protection. Preferred shares are a great way to get a high dividend yield with low volatility.
MTGE Investment Corp. (NASDAQ:MTGE) built a portfolio from RMBS (Residential mortgage backed securities). They use both agency and non-agency RMBS. The non-agency RMBS exposed MTGE to some credit risk. These securities generally reflect much older non-agency loans. They are purchased at a substantial discount to face value. The income generated by the securities consist of both the coupon payment on the mortgage and the accretion of the discount. For investors who are new to mortgage REITs, accretion is the opposite side of amortization. When MTGE buys a loan for $80 and it has a face value of $100, they are able to recognize the difference of $20 as additional interest income over the life of the loan. Overall, I think the credit risk in the MTGE portfolio is acceptable and there is plenty of common equity to absorb the losses if I am wrong.
Source: Seeking Alpha
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