SOURCE: The Bedford Report
NEW YORK, NY--(Marketwire - Jun 30, 2011) - Mortgage Real Estate Investment Trusts (mREITs) have garnered significant attention this month as favorable interest rate spreads allowed several companies in the sector to hike their quarterly dividends. The Bedford Report examines the outlook for diversified REITs and provides equity research on American Capital Agency Corporation (NASDAQ: AGNC) and Annaly Capital Management, Inc. (NYSE: NLY). Access to the full company reports can be found at:
Agency Mortgage REITs such as American Capital Agency and Annaly have portfolios made up principally of mortgages insured by the federal agencies Fannie Mae, Freddie Mac and Ginnie Mae. They typically borrow at low rates and lend in the mortgage markets at higher rates, usually by buying mortgage-backed securities. By purchasing bonds guaranteed by the government, analysts argue these companies take on no risk of default, with the principle concern being an interest rate risk. On the upside, recent remarks from Federal Reserve Chairman Ben Bernanke have led most analysts to conclude interest rates will remain low for the foreseeable future.
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REITs are typically not taxed on their income but are required to pay out 90 percent of their taxable income in dividends. Last week Annaly Capital declared a second quarter 2011 common stock cash dividend of $0.65 per share -- up from $0.62 per share in the earlier quarter.
American Capital Agency recently declared second quarter 2011 dividend of $1.40 per share. The company also priced a public offering of 43,200,000 shares of common stock for total estimated gross proceeds of approximately $1.2 billion. AGNC expects to use the net proceeds from this offering to acquire additional agency securities as market conditions warrant and for general corporate purposes.
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