This has been the only Mreit I could find that actually grew book value last Q over Q and pays a healthy dividend. NYMT is well diversified and will do well in a rising interest rate environment as they are not weighted on fixed rate mbs. What is happening to the Mreits like NLY and AGNC, etc. is that when interest rates increase the book value drops. Why own stock of a company with depreciating assets? Yeah, I know.. the dividend.. but if your principal erodes what good is the dividend? The Fed will either reduce or eliminate the mbs buying and this also will cause the value of these portfolios to drop. No one around to support the price of the bonds. If you are living on dividends and SS like a lot of us you should check out NYMT.. Good Luck to all...
The Fed has no control over mortgage rates directly - only through buying securities to depress interest rates. This is now backfiring, as rates are rising regardless of their purchasing. The market is send a message to the Fed - start extracting yourself from the market. First, they will "taper" buying and then they will start selling into market. They have way overplayed their hand on this.
The market appears to be taking control of long term rates away from the Fed as we have a steepening of the yield curve. If you believe Bernanke and you think he will leave short rates at or near zero then a steepening yield curve will increase the spread so this will help the Mreits earn more. They borrow short term to buy long term. But how will they be able to raise new money? SPO? Not likely with book value dropping. Sell bonds for a profit? Not likely with the values dropping. To whom? The problem lies in the fact that if and when the Fed either stops or slows down the bond purchases the value of the bonds will drop further and if the Fed is not around to support the price who will? They will have to hold the portfolio to maturity or realize a loss if they sell to raise new money. So how do they grow without any SPO's? AGNC, NLY, WMC, etc will be hurt the most with a portfolio of declining assets. People are confused and nervous thus you have a large selling volume in both AGNC and NLY.. Being the market is a forward pricing mechanism it sure looks to me like a lot of investors are fleeing because of the real possibility of more dividend cuts along the falling book values.
NYMT is well diversified and will do well in a rising interest rate environment. A lot of their portfolio is in adjustable rate mbs and CMBS (apartments)..