New mREIT with High Yield and Strong Buy Rating

Western Asset Mortgage Capital Corporation (WMC) is a REIT that invests primarily in Agency RMBS, which are residential mortgage-backed securities for which the principal and interest payments are guaranteed by a U.S. Government agency (such as GNMA) or a U.S. Government-sponsored entity (such as FNMA or FHLMC).  The Company closed of its initial public offering (IPO) on May 15, 2012 with an initial stock price of $18.75.  The stock is currently trading at a 15% premium to the IPO price.

For the 47-day period within the quarter ended June 30, 2012, the Company earned net income of$0.41 per diluted share. During the period, the Company generated core earnings of $4.8 million, or$0.47 per diluted share.

As of June 30, 2012, the Company owned an aggregate securities portfolio equaling $1.92 billion in market value, comprised of $1.53 billion of 30-year fixed-rate Agency RMBS, $223.7 million of 20-year fixed-rate Agency RMBS, $76.8 million of fixed-rate collateralized mortgage obligations and $86.3 million market value of Agency interest-only and inverse interest-only strips.

On July 26, 2012, WAM Capital announced today that its Board of Directors has declared a cash dividend of $0.38 per share for the quarter.  This is an annual dividend yield of 7.02%.  The payout was 93% of EPS but will be 100% of EPS in coming quarters.

WAM Capital has a market cap of $219 million.  WAM Capital is projected to have $2.01 per share in earnings this year.  This is a PE of 9 and an annual dividend yield of 9.26% (based on 100% payout) this year.  The company is projected to grow earnings 52% to $3.06 in 2013.  This is an estimated forward PE of 7.1.

The company has an analyst rating of 1.5 (strong buy) with 8 analysts following.