High-yielding mortgage REITs outpace inflationary cash drag
The bull case argued is that mortgage REITs and non-bank mortgage preferred securities offer double-digit yields that provide real returns in an inflationary environment where T-bills fail.
The argument
The guest argued that holding T-bills in a high-inflation environment guarantees a negative real return. Consequently, investors will seek out high-income platforms like mortgage REITs that offer yields in the teens and hold assets like mortgage servicing rights.
The thesis, stress-tested
✓ What validates it
- ✓Continued dividend stability or increases from named mortgage REITs during inflationary periods
- ✓Outperformance of mortgage REITs relative to short-term Treasury bills on a real-return basis
▸ Risks discussed
- ▸Mortgage REITs are highly sensitive to interest rate volatility and book value fluctuations
- ▸Commercial real estate exposure in some REITs introduces credit risk
Hear it yourself
"Owning t bills right now, given the inflation outlook is a loser. You're clearly not getting a real return based on where t bills are today. This is why so many people in our audience, Julia, buy things like Annaly and the other mortgage rates because they offer returns in the teens."
00:00 / 00:20
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE