The Best-Performing Mortgage REITs In 2023

Among real estate investment trusts (REITs), one of the most popular subsectors with investors are mortgage REITs (mREITs). Although mREITs can be extremely volatile, their dividend yields are usually the highest among the total REIT universe.

Some income-oriented investors try to purchase mREITs when they are out of favor with Wall Street to enhance the dividend yield received and hopefully protect themselves from further share price decline. For those investors, 2022 was a blessing, as rising interest rates blasted the entire sector with losses that in many cases approached 40% to 50%. Dividend yields skyrocketed into the high teens.

This year, many of the mREITs have again found their footing. But which of the 19 mREITs are performing the best and should hold the most appeal for investors going forward?

Take a look at the four best-performing mortgage REITs in 2023. You won’t find some of the more well-known mREITs, like Annaly Capital Management Inc. NLY, AGNC Investment Corp. AGNC or Arbor Realty Trust Inc. ABR on this list. While each has performed better than in 2022, they are nowhere near the best of breed so far this year. The four top-performing mREITs with share prices over $5 in 2023 are:

TPG RE Finance Trust Inc. TRTX: TPG RE Finance Trust, a subsidiary of TPG Real Estate, is a balance sheet lender with a $5.4 billion portfolio of first mortgage loans above $50 million in geographically diversified primary and select secondary markets across the U.S.

TPG RE Finance Trust had a total return of negative 37.85% in 2022. But the future is definitely brighter for the New York-based mREIT with a sector-leading year-to-date return of 25.43%. The main reason for its success was its Feb. 21 operating results in which generally accepted accounting principles (GAAP) earnings per share (EPS) of $0.42 beat the analysts’ estimates by $0.29.

TPG RE Finance Trust’s $0.96 annual dividend presently yields 11.05%.

Great Ajax Corp. AJX is a Tigard, Oregon-based mREIT that was founded in 2014 and has a small market cap of $199.39 million. It’s an externally managed mREIT that acquires, invests and manages a portfolio of mortgage loans secured by single-family, multifamily residential and commercial properties. It also buys foreclosure properties and either rents them or offers to hold mortgages to purchasers.

While Great Ajax Corp lost almost 37% in 2022, its total 2023 return year to date is 18.66%. Its annual dividend of $1.08 per share presently yields 12.39%. Fourth-quarter and year-end 2022 operating results will be announced on March 2.

Brightspire Capital Inc. BRSP is a New York-based, diversified mREIT that acquires, finances and manages a portfolio of commercial real estate loans, mezzanine loans and other types of financing.

Brightspire Capital’s 2022 total return was negative 30.36%, but in 2023 its total return year to date is 17.43%. On Feb. 21, Brightspire Capital announced fourth-quarter operating results in which non-GAAP EPS of $0.27 beat the estimates by $0.03.

Brightspire Capital’s annual dividend of $0.80 presently yields 10.79%.

Cherry Hill Mortgage Investment Corp. CHMI is a Farmingdale, New Jersey-based mortgage REIT that acquires and manages a diversified portfolio of mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS) and other types of residential mortgage assets.

After a poor total return of negative 18.10% in 2022, Cherry Hill Mortgage’s total return year to date is 15.08%. Its annual dividend of $1.08 yields 15.91%. Its fourth-quarter and year-end 2022 operating results will be announced on March 13.

Investors should keep in mind that mREITs as a whole can be quite volatile and have sometimes cut dividends during difficult economic cycles.

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