A Look At Mortgage REIT ETFs Post Q3 Earnings

Flattening of the yield curve has acted as a headwind for mortgage REITs (mREITs) lately. This is because mortgage REITs borrow money at short-term interest rates and when they buy mortgages, they lend it at rates near the higher long-term rates. But overall, rising rate environment is a negative for the space known for hefty yields. (read: Fed Meet Signals December Rate Hike: ETFs That Gained).

Against this backdrop, we have highlighted the earnings of a couple of major players in the mortgage REIT sector, AGNC Investment Corp AGNC and Annaly Capital Management Inc NLY who reported results on Oct 25 and Nov 1, respectively. Both these companies met the Zacks Consensus Estimate.

AGNC Investment Corp

AGNC reported earnings of 61 cents, which came in line with the Zacks Consensus Estimate and were up 3.4% from the year-ago quarter. Book value per common share was $18, down from $19.78 as of Sep 30, 2017. Annualized net interest spread, including TBA dollar-roll income (excluding estimated catch- up premium amortization benefit), for the quarter was 1.30%, down from the previous quarter’s 1.35%.

However, Net interest income NII totaled $188 million, higher than previous quarter’s $177 million. Dividend of 18 cents per share was announced for each of the months of Q3.

AGNC has a Zacks Rank #3 (Hold) and has a Value and Momentum Score of A each (read: Want Large Caps & Guard Against Trade War Too? Play These ETFs).

Annaly Capital Management Inc

Annaly reported earnings of 30 cents, in line with the Zacks Consensus Estimate and flat with the year-ago quarter. Annaly’s book value per share came in at $10.03 as of Sep 30, 2018, compared with $10.35 as of Jun 30, 2018. Net interest spread excluding premium amortization adjustment (PAA) was reported at 1.14% for the third quarter, down 3.4% from the previous quarter.

The quarter’s NII was $315.6 million, down 5.5% from the previous quarter. Annaly has a Zacks Rank #3 and a Value Score of A.

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