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Leveraged mREIT ETNs Offer Very High Current Yields

Published Wed, 22 Jul 2020 09:56:28 -0400 on Seeking Alpha

Seeking AlphaREITsLeveraged mREIT ETNs Offer Very High Current YieldsJul. 22, 2020 9:56 AM ET|| About: ETRACS Monthly Pay 1.5X Leveraged Mortgage REIT ETN (MVRL), REML, Includes: AGNC, ARR, BRMK, CLNC, NRZ, ORCby: Lance BrofmanLance Brofman Debt, REITs, macro, ETF investingSummaryVery low short-term interest rates make carry-type investing very attractive, particularly for those seeking to maximize current income.
There is a new leveraged mREIT ETN that has almost entirely eliminated acceleration risk and has a current yield above 15%.
I still believe that the macroeconomic conditions generally still favor mREITs, REML, and MVRL.
We now know more about the prospects for many of the mREITs since many of the second quarter dividends have been announced.
The damage to the agency mREITs resulting from the sudden extreme decline in interest rates is now over.
There Are Now Two Leveraged MREIT ETNs
After the March 2020 crash, there was only one leverage mREIT ETN remaining. That was Credit Suisse X-Links Monthly Pay 2x Leveraged Mortgage REIT ETN (REML). The two 2X-leveraged mREIT-based ETNs sponsored by UBS Group AG (UBS): the UBS ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN (MORL) and its twin, which was essentially identical in all economic respects, the UBS ETRACS Monthly Pay 2X Leveraged Mortgage REIT ETN Series B (MRRL) were accelerated with disastrous losses for holders who received only $0.21, for their ETNs. Thus, they no longer exist.
There were a number of leveraged ETNs in a portfolio that I constructed, where the most important constraint was to only include securities with current yields above 15%. Other constraints are the typical retail IRA account restrictions which preclude the use of short-selling, margin borrowing, most options strategies and futures contracts. There is nothing magic about the 15%+ current yield threshold. Originally, in 2001, it was a 10% current yield threshold. It reached 30% in 2008 and 60% in March 2009. Only... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
ORCHID ISLAND CAPITAL 5.58   0.0 -0.29 0.96 17.75
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
ARMOUR RESIDENTIAL REIT 17.26   0.0 -9.30 2.04 12.03