Death of the Last Great Mortgage REIT

• Posted by Greg Harmon
• on December 1st, 2011

Mortgage REIT’s were a great place to hide early in the year. Rising stock prices and with the leverage they employ yields of over 15% on some names. I have written about them in this space many times usually featuring Anworth Asset Mortgage, $ANH, Annaly Capital Management, $NLY and my favorite American Capital Agency, $AGNC. But then in July the bottom fell out. Take a look.

Anworth Asset Mortgage, $ANH

Anworth Asset Mortgage, $ANH is now off nearly 15% from its July high and with the bearish red candle print Thursday perhaps ready to take it lower still. it shows no sign of testing the falling trend line resistance as it prints long shadows as it approaches. The Relative Strength Index (RSI) remains bearish and the Moving Average Convergence Divergence (MACD) indicator seems to get enough strength to mount 3 to four day rallies before falling again. Yet it still puts forth a 14.8% annualized dividend yield. The trend lower looks to have some support in the 6 area and then 5.90 lower.

Annaly Capital Management, $NLY

Annaly Capital Management, $NLY, has suffered a similar fate. It has been able to mount slightly stronger rallies but always with lower highs. The trend is clearly lower. Currently it is off 10% from its highs in July, yet it still offers a 15.20% annualized dividend yield. The 15.70 area may eventually prove to be good support but with all of the Simple Moving Averages (SMA)rolling lower and a RSI remaining bearish, it will take more than the MACD cross to get buyers to flood in. Perhaps on a move over 16.50?

American Capital Agency, $AGNC

American Capital Agency, $AGNC, is the real story though. It has held up very well since July with a few pull backs that have held support at the 25.50 area. It has a RSI that has remained bullish outside of a brief dip in early August and a MACD that is starting to increase and a dividend yield of nearly 20%. But look at the chart closely. It has basically moved sideways under 29 since July. Is this the savior of the sector or just the last survivor about to crack and move lower. A move over 29 or under 25.50 should answer this question. Until then if you want to collect Mortgage REIT coupons this is the only place to be. Expect the next ex-date to be around the 21st.

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{+++}Premium Playa’s suggest you either stay away or buy the January 26 Puts as a downside hedge to go long $AGNC if you are looking to clip the coupons. AS my daughter would say easy peasy lemon squeezy.

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