Published Sun, 29 Nov 2020 13:34:13 -0500 on Seeking Alpha
Seeking AlphaETF AnalysisVanEck Vectors Mortgage REIT Income ETF: 9.4% Yield With Upside In 2021Nov. 29, 2020 1:34 PM ET|| About: VanEck Vectors Mortgage REIT Income ETF (MORT)by: BOOX ResearchBOOX Research Conviction DossierOutside-the-box trade ideas through a powerful multi-sector strategy.SummaryMortgage REITs have gained momentum in recent weeks, outperforming the broader real estate sector.
The expectation that a COVID-19 vaccine in 2021 can effectively end the pandemic supports a view that the economic recovery will continue.
The MORT ETF offers an attractive 9.4% yield and well-positioned for more upside as the earnings environment for mortgage lenders improve.
The VanEck Vector Mortgage REIT Income ETF (MORT) offers targeted exposure to "mREITs" that invest in the debt financing side of real estate through mortgages or mortgage-backed securities. While mREITs are recognized as attractive income investments, this year's pandemic has represented a historic challenge considering many properties faced delinquencies amid broader disruptions to the real estate sector. Indeed, MORT is down by 25% year to date further pressured by a collapse in yield spreads limiting cash flow and earnings. That being said, we highlight more recent positive momentum with MORT up 18% over the past month benefiting from an improving economic outlook. We like MORT for its 9.4% yield and see upside as the operating and financial environment for mREITs improve going forward.
The MORT ETF with an expense ratio of 0.41% and $217 million in total assets tracks the underlying 'MVIS US Mortgage REITs Index' which contains only REITs that derive at least 50% of their revenues from mortgages. From this group, REITs invest across commercial and residential loans or related structured securities. The fund follows a market capitalization-based weighting methodology and currently only includes 25 holdings.
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