3 Top Mortgage REITs With Huge Yields for Income Investors
These names operate in a unique segment of the REIT universe and have double-digit yields.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
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.
Here we will discuss three top mortgage REITs for income investors.
AGNC Investment Corp.
American Investment Corp. AGNC 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 CMOs), and non-agency MBS. Many of these are guaranteed by government-sponsored enterprises.
In the fourth quarter of 2024, AGNC Investment Corp. reported a comprehensive loss per common share of $0.99, a reversal from the comprehensive income of $0.93 per share recorded in the previous quarter. Despite this, the company achieved a positive economic return of 13.2% for the full year, driven by its consistent monthly dividend totaling $1.44 per common share.
The company's net spread and dollar roll income, excluding catch-up premium amortization, was $0.65 per common share for the quarter, down from $0.67 per share in the prior quarter.
AGNC's tangible net book value per common share stood at $9.08 as of December 31, 2024, reflecting a decrease from $9.84 at the end of the third quarter. During the quarter, AGNC maintained a portfolio of approximately $59.5 billion in investment securities and net TBA positions, with a weighted average coupon of 3.98%.
The company continued to hedge its interest rate exposure, ending the quarter with a net duration gap of 0.8 years. AGNC's management highlighted the challenges posed by market volatility and interest rate fluctuations during the quarter but expressed confidence in the company's ability to navigate these conditions.
AGNC stock currently yields 15.2%.
Dynex Capital
Dynex Capital, Inc. DX was founded in 1987 and is headquartered in Glen Allen, Virginia. As an mREIT, Dynex Capital invests in mortgage-backed securities (MBS) on a leveraged basis in the United States. It invests in agency and non-agency MBS consisting of residential MBS, commercial MBS (CMBS), and CMBS interest-only securities.
Agency MBS have a guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity, such as Fannie Mae and Freddie Mac. Non-agency MBS have no such guaranty of payment. The trust is structured to have internal management, which is good because it can reduce conflicts of interest and often leads to lower management expenses.
Dynex reported solid fourth-quarter and full-year 2024 results, highlighting resilience in navigating the evolving macroeconomic environment while capitalizing on attractive investment opportunities. Co-CEO Byron Boston emphasized the company’s focus on building a sustainable, long-term business at the intersection of capital markets and housing finance, where demographic trends continue to support residential mortgage-backed securities (RMBS).
The company expanded its board, increased its common equity capital by over 40% to exceed $1 billion, and maintained a disciplined capital allocation strategy that has positioned it as a leader among agency-focused mortgage REITs in total shareholder returns over multiple timeframes.
Dynex brings to the table some competitive advantages, which could enable it to generate strong returns for investors throughout business cycles. These include the trust’s experienced management team with expertise in managing securitized real estate assets through multiple economic cycles, as well as its emphasis on maintaining a diversified pool of highly liquid mortgage investments with minimal credit risk.
DX currently yields 15.9%.
Ellington Credit
Ellington Credit Co. EARN acquires, invests in, and manages residential mortgage and real estate-related assets. Ellington focuses primarily on corporate CLOs, primarily mezzanine debt and equity tranches.
Ellington Credit is externally managed by an affiliate of Ellington Management Group, LLC. The company has an agency residential mortgage-backed securities (RMBS) portfolio of $512 million. Agency MBS are created and backed by government agencies or enterprises.
In April 2024, Ellington Residential Mortgage REIT changed its name to Ellington Credit Company, and announced its intention to transform into a collateralized loan obligations (CLOs)-focused company, moving away from its focus on MBS. On January 17, 2025, shareholders voted and approved of the conversion.
On March 12, Ellington reported its fourth quarter results for the period ending December 31, 2024. The company generated net loss of $(2.0) million, or $(0.07) per share. Ellington achieved adjusted distributable earnings of $7.8 million in the quarter, leading to adjusted earnings of $0.27 per share, which covered the dividend paid in the period. Ellington’s net interest margin was 5.07% overall.
At quarter end, Ellington had $31.8 million of cash and cash equivalents, and $79 million of other unencumbered assets. The debt-to-equity ratio was 2.9X. Book value per share saw a reduction from the previous quarter to $6.53, a 5% sequential decrease.
In April 2024, Ellington Credit began the refocusing and rotation of its portfolio into CLOs. In the most recent quarter, the company grew its CLO portfolio by 18% to $171 million. Given the refocusing of Ellington’s business plan, along with its poor track record of earnings growth, we expect low single digit growth of 4%.
Ellington claims that its portfolio managers are among the most experienced in the MBS sector and its analytics have been developed over the company’s 30-year history. The company possesses advanced proprietary models for prepayments and credit analysis.
EARN stock currently yields 18.2%.
At the time of publcation, Ciura had no positions in any stocks mentioned.