NYMTN - Mortgage REITs: High-Yield Bargains

• Best of Times and Worst of Times: Mortgage REITs endured punishing declines during the pandemic, but have nearly tripled from their lows and are back within shouting distance of pre-pandemic highs.
• The wave of dividend cuts has given way to a frenzy of increases this year as 20 mREITs have raised their payouts. Mortgage REITs now pay an average yield of 8.6%.
• The flattening yield curve has pressured mREITs in recent weeks, pulling valuations back towards more attractive levels. The ongoing strength of the residential housing sector remains a strong tailwind.
• We believe that excluding mREITs from real estate portfolios is imprudent. Despite the plunge last year, mortgage REITs have delivered superior total returns compared to equity REITs over the past half-decade.
• Mortgage REIT earnings season kicks off next week. The three trends we're watching: 1) Dividend Increases, 2) Updated Book Values, and 3) Commentary on the effects of expiring pandemic relief measures.

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