Mortgage REITs, including American Capital Agency Corp (AGNC) and Annaly Capital Management, Inc. (NLY), continued their recent fall today, despite a lack of specific news items to explain the drop.
In the past month, REITs that invest in mortgages have been steadily declining. This trend began accelerating today, with companies like American Capital Agency and Annaly Capital Management taking the biggest hits, with 2.4% and 3.9% declines.
A Bloomberg index of mortgage REIT shares fell as much as 4.5% in intraday action today, which is the biggest one-day decline since last year. Due to the Fed’s increase in mortgage bond buying, these companies may be facing lower earnings — and lower dividends as a result.
A number of negative factors are facing mortgage REITs in the current environment, including;
- Analysts are decreasing earning estimates after a long period of raising numbers.
- A new round of quantitative easing (QE3) in which the Fed is buying mortgage bonds.
- Higher home loan refinancing trends.
- Rising mortgage prepayments.
The factors listed above could lead to continued selling in mortgage based REITs. The trend of lower dividend payouts from these REITs seems to have already begun.
In the past year, both Annaly Capital Management and American Capital Agency both have cut dividends by more than 10%. With AGNC’s quarterly payout declining from $1.40 to $1.25 since last December, and NLY’s falling from $0.57 to $0.50. Both of these stocks incurred a high volume of selling on Monday.
American Capital Agency shares were down 99 cents or 3.04% , while Annaly Capital Management shares were down 55 cents or 3.43% on Monday afternoon.
American Capital Agency Corp. and Annaly Capital Management, Inc. are not recommended at this time, holding Dividend.com DARS™ Ratings of 3.3 out of 5 stars.
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