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.

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%.

New York Mortgage Trust (NYMT)

New York Mortgage Trust acquires, invests in, finances, and manages mortgage-related assets and other financial assets. The trust doesn’t own physical real estate, but rather seeks to manage a portfolio of investments that are real estate related. The trust invests in residential mortgage loans, multi-family CMBS, preferred equity, and joint venture equity.

NYMT posted second quarter earnings on July 31st, 2024, and results were quite weak once again. Adjusted earnings-per-share came to a loss of 25 cents, which missed estimates for a profit of a dime by 35 cents. Total net interest income was $19.04 million, which was up 26% year-over-year, but still missed estimates by over $4 million.

Management noted that recent interest rate market activity was indicative of falling inflation and a slowing economy, with the two-year Treasury falling 29 basis points from its 2024 peak.

The company continues to rotate its capital as a result of these movements, divesting lower yield securities and looking for ways to boost its recurring income in the coming quarters. We note that NYMT is set to post a loss of almost a dollar per share for this year, but we’re using earnings power of 80 cents per share, as earnings are expected to rebound sharply into 2025.

The balance sheet is in much better shape after the capital raises and asset sales that occurred in early 2020, but recession performance is generally poor for mortgage REITs as consumers and businesses default on their mortgages in higher numbers during economic downturns. The trust has increased its recession exposure with its strategy of buying individual loans rather than MBS.

NYMT currently yields 13.6%.

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.