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The Most Shocking Thing About Mortgage REITs

The following video is part of our "Motley Fool Conversations" series, in which senior analyst Anand Chokkavelu discusses topics around the investing world.

Mortgage REITs have been quite popular among dividend investors recently because of their outsized dividend yields that frequently hit the double digits. Anand has been following the industry and shares the most shocking thing he's seen in the last year.

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Anand Chokkavelu has no positions in the stocks mentioned above. The Motley Fool owns shares of Annaly Capital Management. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (9) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 07, 2012, at 6:00 PM, jmar93 wrote:

    This just shows that mortgage reits are no different than any other shocks, you have to be selective. Some are winners and some are losers.

  • Report this Comment On January 07, 2012, at 6:37 PM, buenavista99 wrote:

    Your comments on mortgage REITs are misplaced and downright ignorant. The kind of people investing in them are primarily interested in long-term high yield dividends. So it is almost entirely irrelevant if the stock 'loses money' since this only matters is you are planning on selling it. If not, the stock price is completely irrelevant; the only important issue is your dividend based on your stock basis price.

    Mortgage REITs (and most other REITs) are by far the best type of investment for anyone wanting high dividends, and they have proven over the past 5 years to be absolutely no more risky than ANY other stock. You're either investing in the market based on the 'greater fool theory' (someone will be willing to pay you more for your stock than you paid for it) or the 'I want a return on my investment' plan. I'll take the latter any day.

  • Report this Comment On January 07, 2012, at 6:41 PM, BrassHammer wrote:

    I really appreciate Anand’s comments on REITs.

    Being retired, my primary interest is in dividend bearing stocks, but have been as afraid of REITs as a rattlesnake with a toothache! Basically because I didn’t understand them.

    With considerable apprehension I recently added both NLY and AGNC to my portfolio. After watching Anand’s video I have a better understanding and am more comfortable with my decision.

    Thanks for that!

  • Report this Comment On January 08, 2012, at 12:43 PM, TMFBomb wrote:


    Glad you enjoyed the video. Definitely keep up the work learning more about the industry.

    Fool on,


  • Report this Comment On January 08, 2012, at 7:11 PM, JB0105 wrote:

    I enjoyed Annand's video as well, though I waited for the punch line that never came! What factors account for the disparate performance of the different M-REITS, even within sub-sectors? In particular, even within the group of agency M-REITs, AGNC significantly outperformed the others, and NLY in particular. What factors explain that? Thanks!

  • Report this Comment On January 09, 2012, at 7:45 PM, crazyeconprof wrote:

    As to NLY vs. AGNC : Over the last six months the yield spread has narrowed - pinching earnings. NLY responded by cutting div. while AGNC responded by increasing leverage so as to maintain div.. The 'market' apparently didn't appreciate the divid cut - and is (for now) not concerned about AGNC's leverage climbing from 7X to 10X. I dunno, I had puts on hoping for the div. cut.

    And don't overlook the very low Beta (AGNC at .5 ish) which was 'confirmed' in that it stayed remarkably stable through a very volatile time.

    I am long AGNC.

  • Report this Comment On January 09, 2012, at 9:38 PM, JB0105 wrote:

    Thanks, crazy. So far, it seems that AGNC has made all the right moves (in the market's view) and I guess their response to narrowing yield spreads is another example of that. But if that's the case, why doesn't the market bid up its price to close the yield gap vis a vis the other M-REITs. I am way long AGNC and have been since 2009. I only have small holdings of the other M-REITs.

  • Report this Comment On February 27, 2012, at 10:46 AM, jarek00001 wrote:

    I don't know how to be "respectful with my comments" when I find a presentation such as this one to be utter drivel and to have been delivered in such a halting and distracting manner. I wouldn't be so disappointed had the presentation started with "In summary..." and continued for the 15 seconds it takes to deliver what little substance this message contains. Now I've wasted even more time telling Motley Fool what it should already know.

  • Report this Comment On February 28, 2012, at 9:20 AM, constructive wrote:

    buenavista99 wrote: "So it is almost entirely irrelevant if the stock 'loses money' since this only matters is you are planning on selling it."

    You will sell it some day - perhaps if you see interest rates rising in a few years. At that point will you become interested in its price?

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