Why Most Mortgage REITs Suck
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- čas přidán 4. 03. 2024
- For investors who are on the hunt for income paying stocks, one the first types of investments that they usually come across are mortgage REITs. These stocks always come with significantly higher yields than what you’d typically find from consumer stapes, utilities, and regular equity REITs. Companies like AGNC, Dynex Capital, and New York Mortgage Trust usually offer yields anywhere from 8% on the low end to over 15% on the high end. What’s more is that a good amount of these companies pay monthly dividends, only adding to their appeal. But what’s unfortunate is that, out of all the high yielding types of investments that exist, mortgage REITs are almost always the worst in terms of performance.
According to the National Association of Real Estate Investment Trusts, or NAREIT, the average total return over the past 20 years in the entire mREIT sector was only 1.9%. That’s not just in terms of share price, but also factoring in those huge dividends. This far underperforms other asset classes that provide high dividends, and in my opinion, a lot of these mREITs discourage investors from pursuing higher yielding investments in general. I get a lot of questions about these companies, and a lot of people are often wondering why on earth are the vast majority of these companies so bad? Because based on how these businesses describe themselves, they sound like really safe investments. But the reality is, most aren’t, and have pretty poor long term track records. In this video I’ll go into how mortgage REITs work, and explain why most mortgage REITs are usually bad performers over time.
/ dividendbull
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market.
The stock market is no different, to maintain profit, you need to have some in-depth knowledge on the market
Impressive can you share more info?
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
this is the best video over mReits ever made. Thanks!
RITHM (formerly known as NRZ) has been working good for me for quite some time now. Bought when low. Collecting ever since.
Does not have a good balance sheet.
Ritm is a hybrid not a true mreit
Took me a long time for the light bulb to go off on this one. mREITs are meant to be traded, not long-term investments. ABR has been my only winner
ditto. i've been dollar cost averaging into ABR. Lower interest are down the road, the sun will shine again.
This is one category I have always avoided. Currently I think the housing market is significantly overvalued since the craziness that happened to prices during the pandemic and I consider that a huge risk Mortgage REITs.
BXMT and ABR have been really good to me and the dividends allowed me to buy a lot of stocks when the market was lower last year. I hold these in a retirement account though, because the tax would kill it for me if i didnt
BXMT has a bad balance sheet.
@@wewhoareabouttodiesaluteyo9303 how about ARR stock??
Michael Burry has entered the chat.
I started with NLY when I had no clue what I was doing then sold and moved to AGNC. Now I think I"m done chasing that high yield and I'm going to move to O.
I'm holding a small position in both AGNC and DX. They are sitting at 7% and 17% return respectively over the last 6 months. I'm not hoping to get rich off them but was hoping for long term income with my goal of eventually living off investments. Sounds like I didn't do as much research as I thought I had on all of my picks. Can we get a dedicated video about DX and why they have performed so well recently and if that growth is sustainable?
Me to.
DX has a horrible balance sheet.
Holding AGNC, was one of my first dividend dives, they haven't cut anything while Ive been in, but I just recently broke even after a couple years. TLDR, its nice to see the high yield hit your account each month and it did help me keep on the wagon while I was starting out fresh, but yeah, dumb way to grow money, but looking at the 5 year history of these companies will show you that. Could they pop off sure, but I like long track records of steady upward trends. This video would of helped past me, cause I was all vested in the " oh they are government backed securities"
I recently found out about AGNC and have been loading the boat with shares. The monthly dividend is nice, but hoping to see some growth when rates start to drop later this year. 🤞
@@listerinr I hold it since Dec 2020, last month got break even, the total return so far is 1.2%.
"This video would have helped past me?"
"What exactly were you asking here?"- Chris Hansen
@@listerinr AGNC has a bad balance sheet.
I just sold all of my AGNC shares last month after a year plus holding them. I just got the monthly dividend up to $25 USD a month, but starting hearing rumors they would be cutting the dividend within the next couple of months and decided to sell, and reinvest that money into someting else. I knew the price growth wasn't there, but for the stock price it made holding it worth it for a while.
I own AGNC in-the-money covered calls to receive the 15% dividend with decreased downside risk. For example, $8 and $9 covered calls to blunt a potential dividend cut or stock value decrease, for about 6 months.
OXLC is still pretty good
What do you think of Bradywine Realty Trust?
I have been wondering this when looking at mreits. Why would someone invest in other Reits when these types of comanies give out a really good yield and for something that is reasonably safe?? Great timing for this!
There is more money to be made in BDCs (ARCC, CSWC, GLAD) and there are a couple of good closed end funds (CSQ and ACV)
Finally someone who knows what they are investing in! Every single one of those has a good balance sheet!
I think only ARCC and CSQ pay outside their EPS though. ACV I cannot really tell because my brokerage zeros some EPSs out before market opens.
AIO
@@user00165 Yes, also a good total return.
I own some top performing mortgage REITs. I've been investing with a pro analyst who trades for me and it's been great. I'm about to cross the $800k milestone.
I've found this Ann you mentioned on google and she's impressive. I really appreciate this info you shared.
what kind do you own?
Excellent video but a missed opportunity to talk about ABR.
REFI also worked good for me so far.
Bought into NYMT 3 years ago and it is 100% a dividend trap. Has been down 25% ever since purchase and the dividend just keeps it at that level. Last year they cut the dividend twice. At this point I’m just holding it till it gets back close to even when rates drop so I can off load it. Probably done with reits after this.
Sounds like my beef with ORC, but yeah NYMT does not have a good balance sheet.
Many mReits just presented pretty good numbers, though for Q1 24 period. Feel like timing to go long could be right now with FED rate hike off the table and rates very likely to reverse by year-end. No matter who will make it into the White House will benefit from sustained rate cuts....so it will happen.
I kknow that you feel ABR is much better than an average MREIT. Can you explain why ABR is better?
great vid
I short ARR & ORC in the past couple years, and they had been successful, with rates going down this year, shorting these names isn't a sound strategy anymore.
If I could give advice to young investors first starting out it would be to stay away from mREITs. One of the mistakes I made first starting out was investing in the likes of NLY and REM. These are never to be held as long term investments. At best they are to be traded short term. Longterm they are value destroyers. Just don't do it!
I agree I had NLY than they reverse split & I lost alot, never again.
I'm happy with both ABR and STWD.
Have you looked at the liability STWD has been carrying?
@@wewhoareabouttodiesaluteyo9303 Not worried about it as I have full confidence in Barry Sternlicht.
Nice
I have REM can't complain
REM is pathetic. Total rate of return is horrible.
REM would not be bad if it paid monthly. It has a good distribution rate though.
As an lnvesting enthusiast, I often wonder how top level investors are able to become millionaires off investing. . I’ve been sitting on over $545K equity from a home sale and I’m not sure where to go from here, is it a good time to buy into stocks or do I wait for another opportunity?.
Is there any chance you could recommend who you work with? I've wanted to make this switch for a very long time now, but I've been very hesitant about. I'll appreciate any recommendation.
Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are alot of wealth transfer in this downtime if you know where to look.
Is ABR considered an mREIT?
Yes
And has a bad balance sheet.
@@wewhoareabouttodiesaluteyo9303 Based on their last annual report, they're doing pretty decent.
Agnc and orc have treated me well over the past two years
I understand mREITs enough not to invest in them.
Simple answer: they suck!
NLY sux
One more year and I hope to be break even
Have owned it for years, shows a paper loss as of today, and has for long time.
The dividends received over more than a decade long ago passed this paper loss.
Take it NLY is what you get when you own it.
It has a bad balance sheet.
@@wewhoareabouttodiesaluteyo9303I think we get it - bad balance sheet. Thanks.