Why Annaly and AGNC make REM’s 9.55% yield more durable than it looks

The iShares Mortgage Real Estate ETF (NYSEARCA:REM) offers investors a 9.55% dividend output done a portfolio that is 100% concentrated successful owe REITs. That output is real, but knowing whether it holds requires looking astatine however each large holding generates cash.

A manus interacts with a integer show showcasing 'REIT' and assorted fiscal information points implicit a blurred municipality cityscape, symbolizing existent property concern trusts.

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Mortgage REITs get wealth astatine short-term rates and put it successful longer-duration owe assets, pocketing the spread. Agency mREITs similar Annaly and AGNC clasp government-backed owe securities with debased recognition hazard but precocious complaint sensitivity. Commercial mREITs similar Starwood and Blackstone Mortgage Trust marque loans against bureau buildings, multifamily properties, and concern assets, carrying much recognition hazard but little complaint sensitivity. Because each REITs indispensable administer astatine slightest 90% of taxable income, the dividend is structurally large. The question is whether net prolong it.

REM holds 35 owe REIT positions, but the apical 5 thrust the story. Annaly Capital Management (19.6%), AGNC Investment Corp. (15.3%), Starwood Property Trust (10.1%), Blackstone Mortgage Trust (4.4%), and Rithm Capital (4.4%) unneurotic correspond astir 54% of the fund, arsenic listed below:

• Annaly Capital Management — 19.6%

• AGNC Investment Corp. — 15.3%

• Starwood Property Trust — 10.1%

• Blackstone Mortgage Trust — 4.4%

• Rithm Capital — 4.4%

Annaly Capital Management (NYSE:NLY) is the bedrock. Its full-year 2025 EPS of $2.92 covered the $2.80 yearly dividend, and its nett involvement dispersed expanded from astir 0.4% to astir 1% year-over-year. Management raised the quarterly payout from $0.65 to $0.70 successful aboriginal 2025, holding determination for 5 consecutive quarters. The dividend looks safe.

AGNC Investment Corp. (NASDAQ:AGNC) pays a monthly $0.12 dividend that has been accordant for 24-plus months. CEO Peter Federico stated that "returns successful the marketplace, which I mentioned are astir 13% to 15%, transcend our dividend yield, providing ample coverage." The full-year 2025 economical instrumentality was 22.7%, astir treble the S&P 500. The existent $0.12 monthly complaint reflects a reset from higher humanities levels, making it much durable than pre-2020 payouts.