CHMI - Cherry Hill And Invesco Mortgage: The 2 Best mREIT Fixed-To-Floating Rate Preferreds

2023-04-13 12:00:00 ET

Summary

• Preferred stocks from mortgage REITs that hold government-guaranteed mortgages offer very high yields relative to the risk. Evaluating risk versus reward is the most important evaluation when selecting investments.
• I will make the case that Cherry Hill Preferred “B” and Invesco Capital Preferred “B” are quite undervalued and clearly the best values in this space.
• CHMI-B and IVR-B offer close to a 10% current yield, much higher than their peers in the sector, and also offer superior floating rates for when they float in.
• At current LIBOR, IVR-B will float at a 13.05% yield and CHMI-B will float at 12.77%, with CHMI-B having the superior current yield. NLY-G, which currently floats, offers just 10.05%.
• Over my many years of investing, I have found that you overpay when investing in larger-cap and more well-known names, like the preferred stocks of AGNC and NLY.  Lesser-known names almost always offer better value.

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