New Mortgage REIT ETF Highlights Double-Digit Dividend Yields (MORT, NLY, AGNC, CIM, MFA, HTS)
The weighting of the top-5 members in the index is as follows (as of July 31, 2011): Annaly Capital Management, Inc. (NYSE: NLY) at 19.73%; American Capital Agency Corp. (NASDAQ: AGNC) at 11.46%; Chimera Investment Corporation (NYSE: CIM) at 7.27%; MFA Financial, Inc. (NYSE: MFA) at 6.07%; and Hatteras Financial Corporation (NYSE: HTS) at 5.04%. The top five of the twenty-five constituents account for just over 49.5% of the entire weighting.
This new ETF has a gross expense ratio of 0.54% and a net expense ratio of 0.40%, with expenses capped at 0.40% until May 1, 2013.
What makes this interesting is that all five of the top constituents carry a yield of well above 10% based on the last dividend payments. These underlying entities are required to distribute 90% of their income as dividends to investors, so the returns can fluctuate wildly.
With a promise from Ben Bernanke to keep rates at near-zero for the next two years, the spread between short-term borrowings and leveraging up for mortgage yields is likely to keep the environment positive for entities such as these. The problem is when the short-term borrowing rates go back up. When… If…
JON C. OGG