- Mortgage REITs – along with other fixed income-oriented securities across the credit and maturity curve - have stabilized in recent weeks as bond market volatility has calmed following a historically rough early-2022.
- Earnings results confirmed that the challenging macro environment- marked by a "double-whammy" of rising rates and widening MBS spreads- wasn't the catastrophe to mREITs Book Values that some expected.
- Mortgage REITs are now outperforming Equity REITs for the year, and we continue to see value in a modest allocation towards higher-quality mREITs in a balanced income-focused real estate portfolio.
- Function more like a bank than a property owner, a rising interest rate environment can be a net positive for mREITs, but sharp changes in rates in either direction can wreak havoc on mREITs that are caught over-levered or improperly hedged.
- Dividend yields now average over 10%, a hearty premium to the 3.1% average for equity REITs. While some mREITs are pushing the upper limits of their payout capacity, we've seen twice as many dividend increases as decreases this year.
For further details see:
Mortgage REITs: Risk And Reward In Ultra-High Yield