NEW YORK, NY -- (Marketwire) -- 11/28/11 -- Shares of high yielding Real Estate Investment Trusts (REITs) have been volatile in recent months. While the favorable interest rate spreads have benefitted the sector, REITs -- like the rest of Wall Street -- have been challenged by investor anxiety over the European debt crisis. Moreover, potential measures being proposed by Congress and the Obama Administration could potentially weigh on the industry's profits -- and dividends. The Bedford Report examines the outlook for REITs and provides research reports on RAIT Financial Trust (NYSE: RAS) and ARMOUR Residential REIT (NYSE: ARR). Access to the full company reports can be found at:
The Obama administration's latest plan to help underwater homeowners refinance turned some investors away from mortgage REITs. Mortgage prepayments are known to crimp mortgage REIT earnings. Mortgage REITs make money on the spread between interest rates on short-term debt that they use to buy higher-yielding, long-term mortgage 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.
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While the US housing market remains stagnant, many companies in the Residential REIT industry are taking advantage of a surge in apartment demand. Apartment vacancies are low as many people who once qualified for home loans find themselves unable to secure a mortgage. With mortgage default levels continuing at an elevated level and unemployment levels high, many smaller families may also be finding themselves forced to downsize to an apartment.
RAIT Financial Trust manages a portfolio of real estate related assets, provides a comprehensive set of debt financing options to the real estate industry and invests in real estate-related assets. Presently the company pays an annual dividend of 24 cents for a heft yield of approximately 5.6 percent.
ARMOUR Residential REIT's portfolio consisted of Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities and was valued at $5.3 billion as of June 30, 2011. For the quarter ended September 30, 2011, the Company declared dividends of $0.12 per share outstanding for each month of the quarter. The dividend payments totaled $28.3 million as compared to taxable REIT income available to pay dividends of $31.3 million.
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