If there is one sector that has been out of favor for the past few years, it has been the mortgage real estate investment trust s (REIT). Between the COVID-19 pandemic, a massive refinancing wave, and rising rates, the sector has endured an incredibly difficult environment. That said, it looks like some of the headwinds that have bedeviled the sector are beginning to abate. AGNC Investment (NASDAQ: AGNC) and Annaly Capital (NYSE: NLY) are two leading mortgage REITs with double-digit dividend yields that are worth considering.
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Mortgage REITs are different from the typical REIT that invests in properties and collects rent. Those companies have a pretty easy-to-understand business model. Mortgage REITs generally don't buy real estate; they buy real estate debt (in other words, mortgage-backed securities). Instead of collecting rent, they collect interest. The difference between the interest they earn on their securities and what it costs them to borrow is their profit. Mortgage REITs generally look more like banks than the typical REIT.
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