I thought today would be a good day to discuss the recent Q2 2011 dividend announcements from the mortgage REIT (mREIT) companies that I track. Six out of the seven mREITs I follow have announced their Q2 dividends. For my previous posts on mREITs see here . Also, today the fed announced their latest policy decision which also has a potential impact on mREITs. Lets dive in.

For Q2 2011 dividends for mREITs with non-agency exposure were reduced. Both CIM and IVR reduced their dividends for Q2. On the agency side dividends stayed the same with the exception of NLY. NLY raised their dividend for Q2. The table below shows the new dividends, current stock prices, dividend yields, and P/B values based on Q1 book values.

mREIT valuations have come down slightly since early May with the average yield for this group of mREITs going from 15.67% to 15.77%. Contrary to almost all expectations interest rates have come down during the quarter and spreads have widened. This has benefited all the agency REITs particularly NLY. They were one of the least hedged to rising rates. Again, NLY may be proving to be the smartest guys in the room. Also, for the agency REITs, falling interest rates should have positive impacts to Q2 book values. I expect all the agency mREIT book values to increase in Q2. For the non-agency or hybrid mREITs, CIM and IVR, lower rates and renewed credit concerns most likely impacted earnings and therefore dividends were reduced. Not sure what effect this will have on Q2 book values but IVR at least sees good opportunities in the sector and recently raised more money via another secondary offering.

Lastly, going forward the environment looks to stay positive for mREITs in particular the agency REITs. The fed held rates at current levels in today’s announcement. The extended low period language for interest rates was re-iterated. Expectations for interest rate rises are now pushed back to mid 2012 at the earliest. The fear of QE2 ending and impacting rates upwards has subsided and rates are actually lower with the 10 year note staying below 3%. All of this means that mREITs will continue to do well and is supportive of their high dividends.

I’m looking forward to hear what the mREIT companies say on their Q2 2011 earnings conference calls and in particular what the new book values are. All in all, mREITs continue to look like compelling investments.

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