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MORL And MRRL: Multiple Dividend Cuts Coming Among Mortgage REITs

Published Wed, 12 Jun 2019 08:30:08 -0400 on Seeking Alpha

The yield curve would likely win the award for the most watched and talked-about economic indicator in the last twelve months. Yes, it is compressed and flat. No, it does not mean a recession is coming. But that is a topic for another day. We do want to look at the yield curve though to try and figure out if the mortgage REIT exchange traded notes or ETNs are worth the risk in today's environment.
The current spread
The yield curve compression has been relentless and the current differential is minuscule compared to what we saw 3 years back.
Data by YCharts
This has made it very hard for mortgage REITs, and even banks for that matter, to make money by borrowing at the short end and lending at the long. As their business model has come under increasing pressure, the VanEck Vectors Mortgage REIT Income ETF (MORT) has lagged the broader market.
Data by YCharts
From a total return perspective, things do look better as the yield has made up for a lot of this difference.
Data by YCharts
While we examined the non-leveraged REIT ETF up until this point, the leveraged REITs have had a slightly different profile. UBS ETRACS Monthly Pay 2X Leveraged Mortgaged REIT ETN (MORL) and ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN Series B (MRRL) have outperformed the broader market as the large payouts have more than compensated for the price action.
Data by YCharts
While both these ETNs have held up well on a total return basis, their large... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ANNALY CAPITAL MANAGEMENT 8.95   0.0 -3.32 1.20 13.50
UBS 10.16   8.6 1.18 0.00 6.76


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