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Mortgage REITs – Annaly Capital to Buy CreXus

Annaly Capital Management, Inc. ( NLY ) announced that it has put forth a proposal to acquire CreXus Investment Corp ( CXS ).

The proposal states that Annaly would purchase with cash the remaining outstanding stock of CreXus that is does not already own. Annaly currently owns about 12.4% (9.5 million) of the 76.6 million outstanding shares of common stock of CreXus.

Annaly would pay $12.50 per share in the deal. That is a +12.6% premium on the $11.10 share price that CXS closed at on Friday.

The potential acquisition has been made as Annaly seeks to diversify its investments.

The deal has only been put forth to the Board of Directors of CreXus and is still subject to approval.

Wellington Denahan, Chairman and Chief Executive Officer of Annaly Capital Management, Inc., made the following statement:

“Since our inception in 1997, Annaly has maintained the capacity to diversify its asset base to include real estate related assets in addition to Agency mortgage-backed securities if we determined that compelling other long-term investment opportunities exist relative to the Agency market. While we remain committed to the Agency market, given the current environment, we believe it is prudent to diversify a portion of our investment portfolio. Therefore, we may allocate up to 25% of our shareholders’ equity to real estate assets other than Agency mortgage-backed securities.

“A powerful step in this direction is the proposed acquisition of CreXus. We believe that wholly owning the commercial real estate platform we currently manage through FIDAC is complementary to our existing business and return profile and should provide stable and diversified risk-adjusted returns to our shareholders. CreXus’ capabilities and growth may be significantly enhanced when coupled with Annaly’s broad capital base.

“Our commercial real estate expertise, as well as our expertise in a number of other asset classes, are valuable strategic tools, and we look forward to updating the market on our portfolio as it evolves.

 

Buy This Stock for a 16% Dividend Yield

New York Mortgage Trust (NYMT) has priced its underwritten registered public offering of 13.5 million shares of common stock at a public offering price of $6.89 per share.  Currently the shares are trading at $6.46 so investors can buy the stock below the IPO price.  One of the best times to buy shares is when they sale shares to raise funds.  Typically, the stock price will sell off when new shares are made public creating a cheaper buying price.

New York Mortgage will report Q3 earnings on October 30.  The Company reported Q2 net income attributable to common stockholders of $5.1 million, representing net income per weighted average share of $0.34 for the quarter ended June 30, 2012, as compared to$4.2 million of net income attributable to common stockholders and net income per weighted average share of $0.44 for the quarter ended June 30, 2011.

New York Mortgage has a current dividend yield of 16%.  The dividend was increased 8.0% in Q2 2012.  On September 18, 2012 the board of directors at New York Mortgage Trust approved a dividend of $0.27 per share.

Here are the recent analyst actions:

On October 1, 2012 Thomson Reuters/Verus upgraded NEW YORK MORTGAGE TRUST INC NEW from SELL to BUY.

On September 28, 2012 Ativo Research upgraded NEW YORK MORTGAGE TRUST INC NEW from FAVORABLE to MOST FAVORABLE.

New York Mortgage has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.  First Call analysts have a BUY recommendation with a 2.0 rating.

New York Mortgage has a 12-month price target of $8.

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.

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