Core Insights - The article discusses earnings projections for mortgage REITs and BDCs, highlighting preliminary results from several companies [1] Group 1: Main Street Capital - Main Street Capital (MAIN) has established a preliminary figure in the range of $29.77 to $29.83, with a midpoint of $29.80, which is close to the estimated $29.90 [2] - The projected net investment income for MAIN is between $1.00 and $1.02, slightly below previous projections and the last two quarters [2] - MAIN is favored by income investors due to its high yield and growing NAV per share, which allows for trading above NAV and issuing new shares at a premium [2] Group 2: Orchid Island Capital - Orchid Island Capital (ORC) has been criticized for consistently destroying shareholder capital while paying a high dividend [3] - The business strategy of ORC, which involves buying agency MBS and using repo financing, is similar to that of AGNC Investment, Annaly Capital, and Dynex Capital, but ORC has executed it poorly [4] Group 3: AGNC Investment - AGNC Investment is scheduled to announce earnings on July 22, 2024, with a projected tangible book value per share of approximately $8.55, down 3.3% from $8.84 at the end of Q1 2024 [5] Group 4: Sector Performance - The VanEck Mortgage REIT Income ETF (MORT) has shown a month-to-date return of 7.51%, a significant improvement from a year-to-date return of -2.67% at the end of June [6] - The performance of mortgage REITs has improved due to a sharp drop in Treasury rates, although rates remain elevated overall [6] Group 5: Investor Behavior and Market Dynamics - The increase in investor demand for returns has led to higher prices for financial assets and lower yields on bonds, despite the Federal Reserve's influence on short-term rates [7] - The article questions the effectiveness of the Federal Reserve's strategy of raising rates to combat inflation, suggesting it may lead to increased future interest expenses for the government [7] Group 6: Data and Metrics - There is a need for reliable sources that provide equity REIT metrics, such as same-property NOI and changes to guidance for Core FFO and AFFO [8] - The article mentions the importance of accurate data for preferred shares and common shares, emphasizing the need for comprehensive metrics in the REIT sector [8][18]

Market Overview - U.S. equity markets experienced their worst week since April, with the S&P 500 declining by 2.0% and the Nasdaq 100 dropping by 4% as political developments increased market volatility [1][3] - The Federal Reserve is expected to pivot towards rate cuts later this quarter, with a 98% probability of a rate cut in September [3][4] - The VIX index, which measures stock market volatility, reached its highest level since April [3] Real Estate Sector Performance - The Equity REIT Index rose by 1.5% this week, with 16 out of 18 property sectors showing positive performance, driven by strong earnings from REITs and homebuilders [1][10] - Homebuilders have seen a resurgence, with a nearly 20% increase over the past two weeks [1] - Small-Cap 600 index outperformed, gaining 2.3%, while Mid-Cap 400 declined by 0.3% [1] Economic Data Insights - Continuing jobless claims rose to 1.867 million, the highest since November 2021, while initial jobless claims reached 243,000, significantly above estimates [5][6] - Retail sales were flat month-over-month, but core retail sales (excluding auto and gas) increased by 0.8% from the previous month and 3.8% year-over-year [6][7] - Housing starts and building permits data showed a rebound in multifamily construction activity, offsetting softness in the single-family segment [6][10] REIT Earnings Season - The earnings season for real estate has begun, with REITs showing upside momentum after a challenging two-year period [10][12] - Prologis reported solid results, indicating a bottoming in fundamentals and a slight improvement in demand trends, with a full-year Core FFO growth outlook raised to 7.8% [14] - First Industrial raised its full-year NOI growth forecast to 8.75%, driven by strong leasing activity [15] IPO Activity - Lineage, the world's largest cold storage operator, is planning a $3.8 billion IPO, which would be the largest in the REIT sector this year [12] - The IPO is expected to raise funds to pay down debt and capitalize on the easing of rate-related headwinds in the real estate sector [12]

Core Insights - The article compares the performance of two high-yielding REITs, AGNC Investment (AGNC) and Dynex Capital (DX), highlighting that while both offer substantial dividends, their popularity and performance differ significantly [1][2]. Performance Comparison - DX has shown modest outperformance over AGNC from January 3, 2017, to July 9, 2024, particularly for investors who started positions in 2017, 2018, or 2019 [1][2]. - AGNC has recently outperformed DX for positions initiated between March 2022 and the present, attributed to AGNC trading at a premium to its projected book value [2][4]. - The article emphasizes that AGNC's inflated share price enhances its performance metrics, despite DX's better protection of book value during market fluctuations [2][4]. Book Value Analysis - A detailed analysis of share price and trailing book value (BV) indicates that DX's book value declined less than AGNC's during early 2022, showcasing DX's superior performance in protecting its book value [3][4]. - The article notes that while DX's book value has been more stable, AGNC's share price has been more resilient due to its ability to issue shares at a premium [4][5]. Price-to-Book Ratio Insights - The current price-to-book ratio gap between AGNC and DX is approximately 20%, suggesting that DX would need to increase by 20% or AGNC to decrease by 16% for their ratios to equalize [7]. - The author argues that the significant premium for AGNC is unwarranted, recommending investors consider shifting from AGNC to DX for better risk-reward dynamics [7]. Interest Rate Considerations - Both AGNC and DX reported negative net duration as of March 31, 2024, indicating potential vulnerabilities to interest rate movements [9]. - The article cautions that while lower interest rates may seem beneficial for mREITs, the inherent negative convexity of agency MBS could lead to losses when rates fluctuate significantly [9].

Core Insights - The article discusses the performance and valuation of various mortgage REITs, particularly focusing on Ready Capital (RC), AGNC Investment (AGNC), Dynex Capital (DX), and Orchid Island Capital (ORC) [3][4][5][8]. Ready Capital (RC) - Ready Capital has underperformed in recent years due to declining asset values and non-performing loans, leading to write-downs that have affected investor confidence [3]. - Despite the challenges, the management's decision to mark down poor-performing assets is seen as a positive step, as it may lead to a more accurate reflection of the company's value [3]. - RC has a high dividend yield of 14.1%, which is attractive compared to its book value yield of 9.2%, indicating a solid amount of book value available for investment [4]. AGNC Investment (AGNC) - AGNC is trading at a premium of approximately 1.14 times its book value, which is considered high and potentially detrimental for long-term shareholders [5]. - The article suggests that AGNC should take advantage of its high valuation by issuing equity, which could enhance long-term returns [5]. - AGNC's dividend yield is 14.8%, but the high price-to-book ratio raises concerns about the sustainability of this yield [7]. Dynex Capital (DX) - DX trades at about 95% of its book value, and while it is projected to experience a dip in book value, it is still viewed as a better investment compared to AGNC [5][6]. - The current market perception of DX is negative due to its reported earnings, which are impacted by historical amortized cost accounting and hedging strategies [5]. - The article highlights a significant price-to-book ratio gap between AGNC and DX, suggesting inefficiencies in the market [5]. Orchid Island Capital (ORC) - ORC is compared unfavorably to DX, with DX having a better historical performance and internal management structure [5][6]. - The article implies that investors should prefer DX over ORC, despite ORC's higher dividend yield, due to DX's superior management and performance history [5][9]. Preferred Shares - The article notes that preferred shares may offer better long-term investment opportunities compared to common shares in the mortgage REIT sector [7]. - Preferred shares of AGNC have outperformed common shares, particularly during market downturns, indicating their potential as a more stable investment [7].

12 dogs for the 12% dividend yield Eriklam/iStock via Getty Images If you clicked the title, you’re probably into high-dividend stocks. Alternatively, you may just enjoy my snarking writing. Either way, thank you for joining me. If you didn’t click the title, I have no idea how you got here. The first thing I want to talk about today is PMT-A and PMT-B. These two preferred shares from PennyMac Mortgage Trust (PMT) have been the center of controversy for nearly 10 months. I’m sharing an article we wrote fo ...

Core Insights - The article discusses the recent performance and investment potential of Chimera Investment Corporation's baby bond (CIMN), highlighting its yield to maturity and market conditions [2][5][10]. Group 1: Investment Overview - CIMN has a yield to maturity of 9.95% and is currently priced at $24.50, with an annual dividend rate of $2.25 [4][5]. - The bond has a next callable date of May 15, 2026, with a yield to call of 10.7% [4][5]. - The liquidity of CIMN has been described as weak, which may affect the ability to initiate large positions [5]. Group 2: Comparison with Preferred Shares - CIM-D, a preferred share of Chimera, is trading at $24.85 with a floating yield of approximately 11.37% [6]. - The spread between CIM-D and CIMN is only about 1.4%, leading to a preference for CIMN due to its lower risk and reasonable valuation [6][8]. - The article suggests that the potential for interest rate cuts in the coming year may favor the baby bond over the preferred shares [6][8]. Group 3: Market Dynamics - CIMN's price has recently increased to $25.24, resulting in a decline in its yield to maturity to about 9.21% [13]. - The article notes that the preferred shares may experience price adjustments around their ex-dividend dates, which could impact trading strategies [7][10]. - The author is considering swapping positions between CIM-D and CIMN based on valuation and yield dynamics [10].

Core Insights - The article draws a parallel between the Oakland Athletics' innovative approach to team building under Billy Beane and the investment strategy of focusing on consistent income generation rather than chasing high-profile investments [2][9] Company Overview - Ares Commercial Real Estate Corporation (NYSE: ACRE) is a REIT that focuses on originating loans tied to commercial real estate and maintaining a diversified portfolio of such loans [3] - ACRE is currently yielding 15.3% [3] Recent Performance - Q4 2023 was challenging for ACRE, marked by numerous defaults, a significant reduction in cash flow, and capital tied up in non-performing assets, leading to a dividend cut and a decline in book value [4] - In contrast, Q1 2024 showed improvement, with distributable earnings rising to $0.22 from $0.20 in Q4 2023, and a dividend of $0.25 declared for Q2 [5] Financial Metrics - ACRE's leverage remains stable at 1.9x debt/equity, indicating that the negative impacts are more of a short-term earnings issue rather than a long-term threat to the balance sheet [4] - The company reduced non-accrual loans from $425 million to $292 million, a 32% reduction in one quarter [6] Credit Loss Reserves - ACRE has eight loans rated 4 or 5, which contribute significantly to its Current Expected Credit Loss (CECL) reserve [7] - Specific CECL declined by $42 million in Q1 due to realized losses, while general CECL increased by $20 million due to economic conditions [8] Future Outlook - ACRE's book value before CECL is expected to decline in Q2 due to anticipated losses, while the outlook for book value after CECL will depend on macroeconomic conditions [8] - Management aims to leverage up and negotiate with lenders to access capital for expansion while managing distressed loans [8] - By year-end, ACRE is expected to stabilize its book value and exceed current dividend levels in distributable earnings [8]

Dragon Claws Ares Commercial Real Estate Corporation (NYSE:ACRE) suffered a big decline in its distributable earnings in the first quarter as the trust works through some nonaccrual issues relating to its office and multi-family loan portfolio. The trust was forced to increase its provision for credit losses by more than $22 million in the first quarter which was widely expected after Ares Commercial Real Estate slashed its dividend pay-out by 24% in 1Q24. The stock, however, did not react much to these dis ...

Core Viewpoint - Ares Commercial Real Estate (ACRE) has underperformed the market, with a stock decline of 7.9% compared to a 27% increase in the S&P 500 over the past year, raising concerns about its credit metrics and loan portfolio [2][3][30] Company Overview - ACRE is a Real Estate Investment Trust (REIT) that focuses on sourcing and investing in senior, directly-originated, short-term commercial loans, typically ranging from $10 million to $250 million with terms of 3 to 5 years [5][8] Investment Strategy - ACRE benefits from being managed by Ares Capital Management, which has nearly $400 billion in assets under management, including a $49 billion real estate group that aids in sourcing and managing ACRE's loans [8][11] Credit Losses - ACRE's credit metrics have deteriorated, with a provision for credit losses of $0.38 per share in Q1 2023, an 8.6% increase from the previous quarter and a significant rise from $0.01 per share in Q1 2022 [11][14] - The company had to take an additional $70.8 million in credit loss provisions in 2023, indicating ongoing issues with its loan portfolio, particularly in office real estate [14][19] Loan Portfolio Concerns - ACRE's loan book has decreased to $2.0 billion as of Q1 2024, with total CECL reserves rising to $141 million, representing 7% of all loans held [19][20] - A significant portion of CECL reserves is allocated to office real estate, which has been adversely affected by high vacancy rates due to work-from-home policies [19][26] Market Conditions - The commercial real estate market is facing challenges, with office vacancies at all-time highs and many properties selling for a fraction of their previous valuations, leading to increased defaults and short-sales [25][26] - Notable examples include significant losses on properties in major cities, indicating a broader trend affecting lenders like ACRE [26] Dividend and Valuation - ACRE has cut its dividend by 24% to conserve capital, which may deter investors attracted by its previously high yield [27] - The stock is currently trading at $6.91 per share, representing a price-to-book value of 0.62, suggesting that investors are skeptical about the adequacy of ACRE's provisions [28][30]

Ares Commercial Real Estate Corporation (NYSE:ACRE) Q1 2024 Earnings Conference Call May 9, 2024 9:00 AM ET Company Participants John Stilmar - Managing Director, Investor Relations Bryan Donohoe - CEO Tae-Sik Yoon - CFO Conference Call Participants Doug Harter - UBS Jason Sabshon - KBW Stephen Laws - Raymond James Steven Delaney - Citizens JMP Richard Shane - JPMorgan Operator Good morning and welcome to the Ares Commercial Real Estate Corporation's First Quarter Earnings Conference Call. [Operator Instruc ...