Yahoo Finance discusses three US mortgage real estate investment trusts (mREITs) that have been the best-performing in the past year. mREITs are a subsector of real estate investment trusts that invest in mortgages and mortgage-backed securities (MBS) to generate income from interest payments. These securities include home loans and real estate debt purchased from banks.

What is a Mortgage REIT (mREIT)?

Imagine a company that doesn’t own buildings or land, but instead, it owns mortgages – the loans that people take out to buy homes or other real estate. That’s an mREIT. When you drive around a neighbourhood, some of the homes might have their loans owned by these mREITs.

Why are we talking about them?

While many of the big, well-known mREITs didn’t do very well in the past year, there were three smaller ones that did exceptionally well. Let’s break them down:

1️⃣ Seven Hills Realty Trust (SEVN)

• Where are they based? Massachusetts.
• What did they do recently? They loaned money for the purchase of a big warehouse in South Carolina.
• How did they perform? They earned more money than expected recently. Over the past year, they gave a 12.09% return (profit) to their investors. That’s the best out of all mREITs!
• Any concerns? They give out almost all of their profits as dividends to investors. To keep this up, they need to keep growing their profits.

2️⃣ Arbor Realty Trust (ABR)

• Where are they based? New York.
• How do they make money? They lend money for commercial and residential properties. They earn by charging higher interest than what they borrow at.
• How did they perform? They also earned more than expected. Over the past year, they returned 10.96% to their investors.
• Any concerns? An expert thinks their loans might face challenges in the future, especially if interest rates decrease.

3️⃣ Rithm Capital Corp. (RITM)

• Where are they based? New York.
• What do they do? They manage mortgages and related assets. Think of them as middlemen who handle mortgages for a fee.
• How did they perform? They earned double the expected amount. Over the past year, they gave back 8.38% to their investors.
• Recent news: They tried to buy another company, but some big investors offered a higher price. Some shareholders think Rithm’s offer was too low.

Key Takeaway

These three mREITs have outperformed other mREIT peers in the past year despite the challenging interest rate environment. However, each company has its own unique factors to consider, such as dividend coverage and potential risks.

Investing in mREITs can be profitable, but like all investments, there are risks. It’s always essential to do your research and be informed before diving in!