"According to the ETF Finder at ETF Channel, NRF makes up 4.13% of the Mortgage REIT Income ETF (AMEX: MORT)"
Looked up the etf....they own over 400,000 shares of nrf.......a rapid sell if nrf dropped from index. Looked up index criteria......more than 50% of revenue from mreit activity. Using 3/31 qtr, 70 million gross interest income, 59 million net interest income and 61 million of other revenue. So, using gross interest income as the measure, more than 50% from mreit activity. If net interest income is used, 50% test is failed = drop from index.
NRF wants to shed the mreit classification and mental image in eyes of market. Not only should they change their name, they should take active steps to get dropped from this mreit index.
I think that a historical yield analysis is a valid tool IF the company is essentially the same during the periods measured. However, that is not the case with nrf. When nrf was 75% merit and 25% equity reit, its yield should be closer to pure mreits than equity reits. BUT nrf has changed. A much larger portion of cad now comes from equity reit assets, mfg housing being as stable as they come, and management fees, from 5 million from self-liquidating assets (the vies) to 40 million this year, almost all from non-traded reits, which are perpetual, not self-liquidating, thus annuity-like. Market yields on asset management companies and equity reits are much lower than yields on pure mreits.
The lower yields on nrf reflects the market's realization of the huge shift in nrf's cash flow to a much less risky business model. The safer the cash flow, the lower the yield. Nevertheless, until the fact is visible in the rear view mirror (2Q 2014), we get these lemming driven knee-jerks. It's happening. Forward looking investors can just wait for the "show me" group to catch up.