14% Dividend Payer Arlington Asset Investment Adds Tax Advantages To Great Performance
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Arlington Asset Investment Corp. (AI) focuses on investment in agency-backed RMBS and some MBS that are private label. In the private label case, AI focuses on prime and Alt-A MBS. AI is a micro cap with a market cap of only $241.83 million. However, it is amazingly stable for such with a Beta of only 0.59. It has a 14.01% annual dividend, and this is a simple dividend. It has recently declared this dividend for Q3 2012.
The Fed is acting to keep interest rates low and stable. This makes a mortgage REIT an extremely profitable type of company. In the Fed's most recent announcement, Dr. Bernanke said the Fed would keep interest rates low well into 2015. The Fed continued Operation Twist until the end of the year; and it announced a new, open ended quantitative easing program that will buy $40B per month in MBS (to start). All this will tend to make mortgage rates fall, although likely only by a little. Mortgage rates are already low (3.44% for a 30-year fixed rate loan today, September 17, 2012). This will also tend to stabilize or even inflate prices in the real estate market. This should make mortgage REITs' current holdings more valuable, at least for the near term. This would be especially true of the non-Agency backed MBS. AI is working effectively to take advantage of this situation. READ FULL ARTICLE HERE
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