Business is good for mortgage real estate investment trusts (mREITs) nowadays. Regular readers have heard about mREITs before. These firms raise cash through debt issues, then buy up pools of higher-yielding mortgages. Profits come from the difference between those two rates, otherwise known as the “spread.” And in the current post-financial-crisis environment, these businesses have become money-making machines. Low interest rates allow mREITs to borrow cheap. At the same time, yields on long-term mortgages remain quite high.
Take Arlington Asset Investment Corp (NYSE:AI), for example. This firm owns a huge portfolio of residential mortgages. The company collects monthly interest income on these loans, which come with the full backing of the “Uncle Sam” or government-sponsored agencies. In the latest reported quarter, Arlington earned six-percent interest on its loans, so it earned a three-percent spread. If the company borrows $6.00 for every $1.00 of equity, that comes out to roughly a 18% return on equity. Analysts figure Arlington will stay consistent next year. The Federal Reserve doesn’t seem to be in a rush to raise interest rates. The yields on long-term bonds, meanwhile, continue to rise. If it pays out $2.20 next year, that’s a 17.2% dividend yield (based on a $17.50 stock price).
Source: Income Investors
Related Articles:
- Are The Dividends Safe For These High-Yielding Stocks?
- Who Owns The Top Dividend Stocks?
- Wealth is a Journey, Dividend Stocks Can Take You There
- 3 Higher-Quality, High-Yield Dividend Stocks
- 10 Stocks With Sustainable Dividend Growth
________________________________________________________________
Subscribe to:
Post Comments (Atom)
Popular Posts Last 30 Days
-
The fact is that there are many interesting high-yielding companies that have good long-term prospects. Besides, as the markets get more vol...
-
Part of the joy of investing is seeing your good investments continue to grow, years after your initial purchase. Aside from the financial s...
-
A common measure of dividend sustainability is the payout ratio, the percent of earnings that are paid out to shareholders. Unfortunately, e...
-
Investors looking for the best dividend stocks for 2021 and beyond should take a closer look at the stocks with the longest histories of ann...
-
Some investors — usually referred to as income investors — specifically set out to buy securities that pay them even before stock price appr...
-
A lot changes when you shift from working to retirement, including how you invest. Most investors switch from building a nest egg to living ...
-
Are you looking for a great dividend stock to add to your portfolio? There are many options out there, but the reality is that many just don...
-
Good income investments often come with strong dividend yields, delivering income that's higher than an investor could find at a bank or...
-
Last month we wrote about the top four companies in our model portfolio in the article 4 Dividend Dominators for 2021 - Companies With More ...
-
Safety and tranquility are both important aspects of investing for retirement. Yes, we want stocks with meaningful upside. We also -- howeve...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.