Published Sun, 15 Sep 2019 09:35:00 -0400 on Seeking Alpha
Co-produced with Beyond Saving and PendragonY for High Dividend Opportunities
Many income investors like to get very high yields by investing in the morgtate REIT sector, or the mREIT sector. This is a very juicy sector with many mREITs currently yielding well over 11%.
A frequent question we have been receiving from members is the theoretical impact of negative interest rates on mREITs like Annaly Capital Management (NLY), AGNC Investment Corp (AGNC) and Dynex Capital (DX). These are investments with very juicy yields. NLY currently yields +12%, AGNC yields 13%, and DX yields 12.7%.
In our article today, we will focus on Annaly Capital (NLY), which is one of our favorite mREIT picks and how it will be impacted by lower interest rates. We recently wrote on NLY in a report here, explaining why NLY could double in price if we hit a recession.
The first thing to remember is that lower interest rates are great for agency mREITs. mREITs want lower rates- the lower the better. Why? Borrowing costs.
Source: NLY 10-Q
Last quarter, NLY was borrowing $105 BILLION at a weighted average rate of 2.69%. That is $2.82 billion in annualized interest that NLY pays. Suppose instead of paying 2.69%, interest rates were negative and they could borrow at -0.25%: NLY would be getting paid $262 million. What was once their largest expense, would suddenly become a source of profit.
Negative interest rates do not change the nature of the yield curve.
If we... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|NEW RESIDENTIAL INVESTMENT||14.98||18.0||0.83||2.00||13.28|
|AMERICAN CAPITAL AGENCY||15.64||0.0||-1.54||1.92||12.21|
Older articles featuring New Residential Investment (NRZ):10% Yield: Why I 'Sleep Well At Night' With A 100% High-Yield Portfolio - Part 2
The Retirees' Dividend Portfolio - John And Jane's October Taxable Account Update: Budgeting In Retirement.
10% Yield; Why I 'Sleep Well At Night' With A 100% High Yield Portfolio
5%+ Dividend Yield Portfolio: Winning With A Defensive Tilt (October 2019 Review)
Detailed Assessment Of AGNC Investment's Results For Q3 2019 (Includes November 2019-January 2020 Dividend Projection)
The Retirees' Dividend Portfolio - John And Jane's September Taxable Account Update: Adding McDonald's
AGNC Investment's Q3 2019 Income Statement And Earnings Projection - Part 2 (Includes Dividend Sustainability)
5%+ Dividend Yield Portfolio: Defensive Positioning Paying Off (Sep 2019 Review)
2019 Third Quarter Update, 10% Yield; Rare BUY-Signal Revealed, POT5.7 Release
Dividend Champions For October 2019