Why Most Mortgage REITs Suck

For investors who are on the hunt for income paying stocks, one the first types of investments that they usually come across are mortgage REITs. These stocks always come with significantly higher yields than what you’d typically find from consumer stapes, utilities, and regular equity REITs. Companies like AGNC, Dynex Capital, and New York Mortgage Trust usually offer yields anywhere from 8% on the low end to over 15% on the high end. What’s more is that a good amount of these companies pay monthly dividends, only adding to their appeal. But what’s unfortunate is that, out of all the high yielding types of investments that exist, mortgage REITs are almost always the worst in terms of performance.

According to the National Association of Real Estate Investment Trusts, or NAREIT, the average total return over the past 20 years in the entire mREIT sector was only 1.9%. That’s not just in terms of share price, but also factoring in those huge dividends. This far underperforms other asset classes that provide high dividends, and in my opinion, a lot of these mREITs discourage investors from pursuing higher yielding investments in general. I get a lot of questions about these companies, and a lot of people are often wondering why on earth are the vast majority of these companies so bad? Because based on how these businesses describe themselves, they sound like really safe investments. But the reality is, most aren’t, and have pretty poor long term track records. In this video I’ll go into how mortgage REITs work, and explain why most mortgage REITs are usually bad performers over time.

[kortyEdna]

Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market.

[HubiD]

RITHM (formerly known as NRZ) has been working good for me for quite some time now. Bought when low. Collecting ever since.

[Djedefra]

this is the best video over mReits ever made. Thanks!

[stonersgym]

Took me a long time for the light bulb to go off on this one. mREITs are meant to be traded, not long-term investments. ABR has been my only winner

[ugottry]

BXMT and ABR have been really good to me and the dividends allowed me to buy a lot of stocks when the market was lower last year. I hold these in a retirement account though, because the tax would kill it for me if i didnt

[drescherjm]

This is one category I have always avoided. Currently I think the housing market is significantly overvalued since the craziness that happened to prices during the pandemic and I consider that a huge risk Mortgage REITs.

[DuffyJ]

I started with NLY when I had no clue what I was doing then sold and moved to AGNC. Now I think I"m done chasing that high yield and I'm going to move to O.

[genxtech]

I'm holding a small position in both AGNC and DX. They are sitting at 7% and 17% return respectively over the last 6 months. I'm not hoping to get rich off them but was hoping for long term income with my goal of eventually living off investments. Sounds like I didn't do as much research as I thought I had on all of my picks. Can we get a dedicated video about DX and why they have performed so well recently and if that growth is sustainable?

[letsinvestigateit]

there is no such thing as a bad investment if you buy it at the right time. agnc only went up from 2008 to 2012 and in 2012 you would of probably told people to buy saying its one of the best performers. I remember when people loved agnc like it was must have in portfolio. I never bought it. As interest rates drop its going to make another 4 or 5 year move up again just like before. The only reason all of these reits have performed poorly is because it was a interest rate hike that was the fastest we have ever had in history and real estate is not as good as people say. I told everyone to stay away. I am still not a big fan of reits but they are ok investments now unless interest rates rise again. You guys are better off buying businesses if you want dividends.

[StmPunkPrivateer]

Holding AGNC, was one of my first dividend dives, they haven't cut anything while Ive been in, but I just recently broke even after a couple years. TLDR, its nice to see the high yield hit your account each month and it did help me keep on the wagon while I was starting out fresh, but yeah, dumb way to grow money, but looking at the 5 year history of these companies will show you that. Could they pop off sure, but I like long track records of steady upward trends. This video would of helped past me, cause I was all vested in the " oh they are government backed securities"

[AmeriGlobal]

There is more money to be made in BDCs (ARCC, CSWC, GLAD) and there are a couple of good closed end funds (CSQ and ACV)

[karinmottola]

I own AGNC in-the-money covered calls to receive the 15% dividend with decreased downside risk. For example, $8 and $9 covered calls to blunt a potential dividend cut or stock value decrease, for about 6 months.

[turbotoommyguns]

Agnc and orc have treated me well over the past two years

[MikeDD]

I have been wondering this when looking at mreits. Why would someone invest in other Reits when these types of comanies give out a really good yield and for something that is reasonably safe?? Great timing for this!

[SlowDriver]

I short ARR & ORC in the past couple years, and they had been successful, with rates going down this year, shorting these names isn't a sound strategy anymore.

[hellochriis]

Many mReits just presented pretty good numbers, though for Q1 24 period. Feel like timing to go long could be right now with FED rate hike off the table and rates very likely to reverse by year-end. No matter who will make it into the White House will benefit from sustained rate cuts....so it will happen.

[Carlosvinic]

What do you think of Bradywine Realty Trust?

[sagig]

I kknow that you feel ABR is much better than an average MREIT. Can you explain why ABR is better?

[glennshoemake]

I'm happy with both ABR and STWD.

[RealAnthonyJones]

Bought into NYMT 3 years ago and it is 100% a dividend trap. Has been down 25% ever since purchase and the dividend just keeps it at that level. Last year they cut the dividend twice. At this point I’m just holding it till it gets back close to even when rates drop so I can off load it. Probably done with reits after this.