NEW YORK, NY--(Marketwire - Jan 21, 2013) - High yielding mortgage REITs after an impressive start to 2012, began to show volatility in the fourth quarter. Increases in prepayments and stimulus measures by the Federal Reserve have pressured spreads and as a result a number of mortgage-based REITs have lowered their dividends. Research Driven Investing examines investing opportunities on Real Estate Investment Trusts and provides equity research on CYS Investments Inc. (
REITs trade like stocks, but by law, they must pay out 90 percent of their taxable income to shareholders as dividends. Dividend returns for Mortgage REITs are partially dependent on interest rate spreads.
Freddie Mac on Thursday reported that average U.S. rate on the 30-year fixed mortgage fell to 3.38 percent, hovering near the 40 year low of 3.31 percent seen in November. According to Freddie Mac 30-year mortgage rates average 3.66 percent in 2012, which was the lowest average seen in 65 years. Low mortgage rates allow homeowners who are underwater with their mortgages to refinance, and in turn increase prepayments on mortgages. Mortgage prepayment rates at the beginning of the fourth quarter 2012 soared to 7 year highs.
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CYS Investments is a specialty finance company that invests on a leveraged basis in residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. The company pays a quarterly dividend of $0.40 per share.
Invesco Mortgage Capital is a real estate investment trust that focuses on financing and managing residential and commercial mortgage-backed securities and mortgage loans. The company is scheduled to release its fourth quarter 2012 results before market open on Wednesday, February 6th. Shares of Invesco have gained nearly 55 percent in the past year.
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