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A Look at Mortgage REIT ETFs Post Q2 Earnings

Zacks Equity Research
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Amid increasing global rift, financial market volatility declined in the second quarter and equity markets recovered from the weak performance of the first quarter. There was continued resurgence in the performance of the U.S. economy but lack of alignment in the global growth picture. There was a modest increase in interest rates and the yield curve flattened further as the Federal Reserve continued to slowly increase short-term rates, while longer-term rates remained relatively well supported (see all Real Estate ETFs here)


Below we highlight the earnings of some of the major players in the mortgage REIT sector.


Annaly Capital Management Inc NLY


The company reported in early August. Earnings per share of 30 cents beat the Zacks Consensus Estimate of 29 cents and came in line with the year-ago quarter. The book value per common share was $10.35 compared with $10.53 as of Mar 31, 2018. The net interest spread was 1.15%, below last quarter’s 1.55%.


However, NII totaled $334.1 million, down around 35% sequentially.


AGNC Investment Corp AGNC


The company reported in late July. AGNC’s EPS of 63 cents beat the estimate by a whisker but came in 3 cents less than the year-ago figure. The tangible net book value per share was $18.41, which is 1.2% less than the last-quarter figure of 18.63. The net interest spread and TBA dollar role income for the quarter excluding catch up premium amortization benefit was 1.35%, reflecting a rise from 0.09% witnessed last quarter.


The quarter’s NII was $177 million, reflecting a sharp decline of 21.33% from the prior-quarter reported figure of $225 million. AGNC declared a monthly common stock dividend of 18 cents per common share for August 2018.


ETFs to Watch


Below we have highlighted two mREITs ETFs that have significant exposure to the above-mentioned companies and are likely to remain in focus in the upcoming days (read:  5 ETF Ways to Trade 6 Year High U.S. inflation).


iShares Mortgage Real Estate ETF REM


REM tracks the FTSE NAREIT All Mortgage Capped Index, measuring the performance of the residential and commercial mREIT market in the United States. There are 36 holdings in the basket with the two mentioned companies occupying 29.07% weight and are among the top two holdings in the fund. AUM (as of Aug 13, 2018) is $1.14 billion and the expense ratio is 0.48%. The fund has had a loss of 0.05% in the past month but has returned 12.02% in the past six months. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


VanEck Vectors Mortgage REIT Income ETF MORT


This ETF tracks the MVIS Global Mortgage REITs Index which is intended to track the overall performance of U.S. mortgage real estate investment trusts. The number of holdings are 25 with the aggregate weight of the mentioned companies being 21.67%. The AUM (as of Aug 13, 2018) is $145.10 million and the expense ratio charged is 0.41%. The past one month and six month returns are 0.17% and 13.14%, respectively. It has a Zacks ETF Rank of 3 with a Medium risk outlook (read: Low Risk ETFs Taking Off on Rising Tariff Threats).


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REITS/MORTGAGE (REM): ETF Research Reports
VANECK-MTG REIT (MORT): ETF Research Reports
AGNC Investment Corp. (AGNC) : Free Stock Analysis Report
Annaly Capital Management Inc (NLY) : Free Stock Analysis Report
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