Invesco Mortgage Capital Inc (NYSE:IVR) – The Sector Performer among mortgage REITs – CYS, AGNC


Dallas, Texas 09/10/2013 (Financialstrend) – Invesco Mortgage Capital Inc (NYSE:IVR), a real estate investment trust (REIT), with the main objective to provide attractive risk-adjusted returns to its shareholders, through dividends and also through capital appreciation, acquires finances and manages residential and commercial mortgage-backed securities and mortgage loans, which it collectively refers to as its target assets. The company invests in residential mortgage-backed securities for which the United States Government agency, or a federally chartered corporation, or the Federal Home Loan Mortgage Corporation assures payments of principal and interest on the securities.

The stock closed at $15.69 on Monday, September 9 and currently it is trading 24.5% below its 52-week high of $20.80 and 15% below its 200-day SMA.

Alongside the major players like CYS Investments (NYSE:CYS) and American Capital Agency (NASDAQ:AGNC), smaller players like IVR also suffered losses with significant exposure to changing interest rate environment.

During the 2Q13 the company bought $149 million in CMBS and $195 million more in RMBS which would serve as protective cover against interest rate volatility. Moreover its leverage in Agency RMBS, non-Agency RMBS, and CMBS also went up during the quarter and IVR my sell some of its Agency RMBS during 2H13 to lower the leverage level.

IVR reported core earnings of $0.59 per common share for 2Q13 which is much lower compared to earnings of $0.64 during the same quarter of the last fiscal.

As a general rule, the low interest rate volatility favors mortgage REITs and hence it is well expected that the core earnings of IVR and such other firms will bounce back once the volatility of Q2 settles down. Given the company’s hedging coverage and its lesser investment in Agency RMBS, primary area of concern with rising interest rates, it seems IVR is substantially safer bet.

Despite challenging posed by interest rate rise during 2Q13 by most of the mortgage REIT companies, IVR has performed better compared to industry peers and given the fundamental of the company it is expected to continue its performance in time to come.