High Yielding REITs Dividends Pressured by Lower Spreads and Bond Yields
Five Star Equities Provides Stock Research on Apollo Residential Mortgage and Crexus Investment
NEW YORK, NY -- (Marketwire) -- 11/14/12 -- Shares of high yielding REITs have been relatively flat this month. The Vanguard REIT ETF -- which tracks the performance of an index that measures the performance of publicly traded equity REITs -- has stalled after the Federal Reserve in September announced plans to purchase $40 billion in mortgage-backed securities a month. Five Star Equities examines the outlook for diversified REITs and provides equity research on Apollo Residential Mortgage Inc. (NYSE: AMTG) and Crexus Investment Corp. (NYSE: CXS).
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Investors have long been attracted to the high yields of mortgage REITs, which currently averages around 13 percent, nearly 7 times the average dividend yield of the S&P 500. The Fed's announcement has caused drops in spreads, bond yields and homeowner's borrowing costs, and as a result companies' earnings and dividends have been under pressure.
"Through the use of leverage, these REITs have yields in the midteens. At this time, mortgage REITs are benefiting from historically low short-term rates, but tightening spreads, or a sudden freeze in the credit markets, would have a significant negative impact on these firms," Morningstar analyst Patricia Oey wrote in a report.
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Apollo Residential Mortgage is a real estate investment trust that primarily invests in residential mortgage-backed securities, residential mortgage loans and other residential mortgage assets throughout the United States. The company currently offers an annual dividend of $3.40 per share for a yield of roughly 16.15 percent.
Crexus is a REIT focused in the commercial space, with an objective of providing attractive risk-adjusted returns to their investors over the long-term primarily through dividends and secondarily through capital appreciation. Annaly Capital Management recently announced that they have offered to purchase all of the shares that they don't already own in Crexus Investment Corp.
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