American Capital Slams mREIT ETFs

With American Capital currently trading below $22, $25.50 would mean significant upside. Still, dividend cuts are becoming the rule rather than the exception for mREITs. American Capital’s third-quarter dividend was 80 cents a share, down from $1.05 a year earlier.

Two Harbors Investment (NYSE: TWO) delivered a third-quarter dividend 22.2% below what it paid in the same quarter a year ago. Invesco Mortgage Capital’s (NYSE: IVR) dividend has tumbled 23.1% year-over-year. Annaly Capital (NYSE: NLY), REM and MORT’s largest holding, paid 35 cents a share in the most recent quarter after paying 50 cents a share last year.

Annaly, Two Harbors an Invesco Mortgage combine for 26.4% of REM’s weight and 25.2% of MORT’s weight. It has been speculated that dividend yields on REM and MORT are due to come in and that may be true, but those lower yields may come by way of reduced payouts, not capital appreciation. [mREIT ETFs may not Enjoy 15% Yields for Long]

iShares Mortgage Real Estate Capped ETF

Tom Lydon’s clients own shares of REM.