If there is one sector that has been out of favor for the past few years, it has been the mortgage real estate investment trusts (REIT). AGNC Investment (NASDAQ: AGNC) and Annaly Capital (NYSE: NLY) are two leading mortgage REITs with double-digit dividend yields that are worth considering. Mortgage REITs are different from the typical REIT that invests in properties and collects rent.
First, they suffered through margin calls, then a refinancing wave, and now a hawkish Federal Reserve. Annaly invests in agency mortgage-backed securities (MBS), which are guaranteed by the government. In other words, if we hit a recession and borrowers fail to make their mortgage payments, Annaly still gets its principal and interest.
The stock market bounced back in a big way in July with its best month since November 2020. Annaly Capital Management (NYSE: NLY) was among the winners as its stock price ended the month 16.4% higher, according to S&P Global Market Intelligence. As a mortgage real estate investment trust (REIT), Annaly Capital invests in mortgages and mortgage-backed securities and earns revenue on the interest payments.