For investors looking for income, Real Estate Investment Trusts are often an excellent source of potential investments.

Mortgage REITs are a unique segment among the REIT universe, and many have extremely high yields.

Mortgage REITs are risky, as their business model involves purchasing mortgages and generating income from the monthly payments. Still, their elevated dividend yields make them appealing on the surface.

This article will discuss 3 top mortgage REITs for income investors.

Sachem Capital (SACH)

Sachem Capital Corp is a Connecticut-based real estate finance company that specializes in originating, underwriting, funding, servicing, and managing a portfolio of short-term (i.e., three years or less) loans secured by first mortgage liens on real property located primarily in Connecticut.

Each of Sachem’s loans is personally guaranteed by the principal(s) of the borrower, which is typically collaterally secured by a pledge of the guarantor’s interest in the borrower. Sachem generates around $65 million in total revenues.

On August 14th, 2024, Sachem Capital posted its Q2 results for the period ending June 30th, 2024. Total revenues for the quarter came in at $15.2 million, down 7% compared to Q2-2023.

The decrease in interest income was due to lower number of loans originated, modified or extended in compared to last year. As a result, fee income from loans, primarily made up of origination fees, were down about 37.2% year-over-year.

Moving forward, there should be several key drivers to Sachem’s growth. First, despite the rise in interest rates, Sachem believes there is a significant market opportunity for a well-capitalized “hard money” lender to originate attractively priced loans to small and mid-scale real estate developers with good collateral.

Second, the competitive landscape for Sachem remains favorable, as many banks and other traditional lenders still have restrictive lending criteria and many non-traditional lenders are under-capitalized.

Third, Connecticut's residential real estate market, its primary market, has stabilized and is quite strong. Finally, Sachem continues its expansion beyond Connecticut and has a growing presence in other states, especially in Florida and Texas.

SACH currently yields 13%.

AGNC Investment REIT (AGNC)

American Capital Agency Corp is a mortgage real estate investment trust that invests primarily in agency mortgage–backed securities (or MBS) on a leveraged basis.

The firm’s asset portfolio is comprised of residential mortgage pass–through securities, collateralized mortgage obligations (or CMO), and non–agency MBS. Many of these are guaranteed by government–sponsored enterprises.

AGNC Investment Corp. (AGNC) announced its financial results for the second quarter of 2024 on July 22, 2024. The company reported a comprehensive loss of $(0.13) per common share, which included a net loss of $(0.11) per common share and an additional $(0.02) per common share in other comprehensive loss (OCI) on investments marked-to market through OCI.

The net spread and dollar roll income per common share was $0.53, excluding a $0.02 per common share benefit from a “catch-up” premium amortization due to changes in projected constant prepayment rate (CPR) estimates.

AGNC’s tangible net book value per common share was $8.40 as of June 30, 2024, a decrease of $(0.44) per common share, or 5.0%, from $8.84 as of March 31, 2024.

AGNC held $5.3 billion in unencumbered cash and Agency MBS as of June 30, 2024, representing 65% of the company's tangible equity. The company's portfolio had an average projected life CPR of 9.2% and an actual CPR of 7.1% for the quarter.

The annualized net interest spread for the quarter was 2.69%. During the quarter, AGNC issued 45.8 million shares of common equity through its At-the-Market (ATM) offerings, generating net proceeds of $434 million.

AGNC stock currently yields 14%.

Annally Capital (NLY)

Annaly Capital Management, Inc. is an mREIT that invests in residential and commercial mortgages. The trust’s investments include agency mortgage-backed securities, non-agency residential mortgage assets, residential mortgage loans, commercial mortgage loans, securities, and other commercial real estate investments.

On July 24, 2024, Annaly announced its financial results for the quarter ending June 30, 2024. The company reported a GAAP net loss of $0.09 per average common share, while earnings available for distribution (EAD) were $0.68 per average common share for the quarter. The company achieved an economic return of 0.9% for the second quarter and 5.7% for the first half of 2024.

Book value per common share at the end of the quarter was $19.25. Annaly’s GAAP leverage ratio increased to 7.1x, up from 6.7x in the prior quarter, while economic leverage rose to 5.8x from 5.6x. The company declared a quarterly common stock cash dividend of $0.65 per share.

Annaly’s Mortgage Servicing Rights (MSR) portfolio ended the quarter with a market value of $2.8 billion, up 5% quarter-over-quarter, representing 22% of dedicated equity capital.

As long as the real estate market remains on sound footing, Annaly should continue to grow gradually and support its hefty dividend. NLY stock currently yields 13.2%.

Disclosure: No positions in any stocks mentioned

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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.