Celebrating a Stunning Start to 2013… and Bullish News on Mortgage REITs

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

Despite a relatively calm week, U.S. stocks have shot out of the starting blocks in 2013.

And you’ve had a very strong start to the year in your Dividend Pro portfolio.

Gains above 7% in the first half of January alone include:

  • Rentech Nitrogen Partners, L.P. (RNF), soaring 17.06%
  • CVR Partners, LP (UAN), jumping 10.70%
  • Two Harbors Investment Corp. (TWO), climbing 10.65%
  • Omega Healthcare Investors Inc. (OHI), rising 9.01%
  • Apollo Residential Mortgage Inc. (AMTG), increasing 7.58%

By way of comparison, the S&P 500 is up “only” 3.26%.

Over a longer time frame, your position in Two Harbors Investment Corp. (TWO) is up 30.88% and Rentech Nitrogen Partners, L.P. (RNF) is ahead 26.85%.

Six other positions — Global X SuperDividend ETF (SDIV), PIMCO Municipal Income Fund II (PML), Omega Healthcare Investors Inc. (OHI), Apollo Residential Mortgage Inc. (AMTG), CVR Partners, LP (UAN) and Northern Tier Energy Trust LP (NTI) — are up by between 10.32% and 18.36%, as of the close on Jan. 15.

This week, I give you some bullish news on U.S. mortgage real estate investment trusts (REITs).

After a sharp sell-off in Q4, mortgage REITs are slowly, but surely coming back. That’s good news for your U.S. mortgage REIT-related holdings Annaly Capital Management (NLY) and two of your top five performers this year, Two Harbors Investment Corp. (TWO) and Apollo Residential Mortgage Inc. (AMTG).

Here’s why…

Mortgage REITs endured a sharp sell-off because of the decline in the 10- to 2-year Treasury spreads. While mortgage REITS could continue borrowing at ever lower rates, the rate at which they could reinvest the proceeds fell by even more. In fact, since 2011, the spread between treasuries declined by up to 42%.

But with the recent rise in Treasury yields, this trend has not only stopped, but it has reversed. In the case of Annaly Capital Management (NLY), the spread actually recently rose 14%. This is terrific news for your current holdings, as well as broader-based sectoral bets you’ve held in the past like the iShares FTSE NAREIT Mort Plus Cp Idx (REM).

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No wonder these positions have attracted substantial insider buying in the past few months.

The bottom line is that I continue to be bullish on your Dividend Pro mortgage REIT holdings, as a source of both income and capital appreciation.

Portfolio Update

Global X SuperDividend ETF (SDIV) rose 0.84% last week, hitting a 52-week high. With global markets on a bull run, SDIV is a BUY.

Two Harbors Investment Corp. (TWO) continued its relentless rise, jumping another 2.68% this past week as it broke out to a new 52-week high. This top U.S. mortgage REIT remains a BUY.

PIMCO Municipal Income Fund II (PML) was unchanged to the penny. Your monthly distribution of 6.5 cents was declared on Jan. 10. After enduring a big sell-off at the end of 2012, PML is now a BUY.

Apollo Investment (AINV) dropped back 2.12% after the previous week’s strong gain. Apollo’s cheap valuation, high dividend and technical uptrend make AINV stock attractive. The company will report its third quarter results for the period which ended December 31, 2012, on Wednesday, February 6, 2013. Trading above its 50-day moving average (MA), AINV is a BUY.

Omega Healthcare Investors Inc. (OHI) rose 0.24%. The company declared a common stock dividend of $0.45 per share, increasing the quarterly common dividend by $0.01 per share over the previous quarter. The common stock dividend is payable February 15, 2013, to common stockholders of record as of the close of business on January 31, 2013. OHI is now a BUY.

PowerShares Preferred (PGX) dropped back 0.60% on the week. Chock full of the preferred shares of financial institutions, this preferred stock bet paid out a monthly dividend of 7.8 cents on Jan. 15. PGX is a BUY.

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Fifth Street Finance Corp. (FSC) fell 2.03%, after going ex-dividend on Jan. 11. Its monthly dividend of $0.0958 is payable on Jan. 31. FSC plans to report earnings for the quarter which ended December 31, 2012, after the financial markets close on Wednesday, February 6, 2013. FSC is a BUY.

CVR Partners, LP (UAN) continued its relentless rise, jumping 1.49% this past week. UAN’s strong growth is expected to continue through 2013. Breaking out to a six-month high, UAN is a BUY.

Rentech Nitrogen Partners, L.P. (RNF) consolidated its recent bull run, ending the week 0.61% lower after hitting a new all-time high. The company reported that it has completed its previously announced capacity expansion project to increase urea production by 21,900 tons, or 15%, at its nitrogen fertilizer facility in East Dubuque, Ill. This is an annual increase of 2,650 tons from the previous estimate of 19,250 tons and is based on actual plant operation. RNF remains a BUY.

Annaly Capital Management (NLY) rose 0.68%. As noted above, there is good news on the horizon for REITs. A cash dividend of 45 cents per common share is payable on Jan. 29 to common shareholders of record on Dec. 28. The ex-dividend date is Dec. 26. Back above its 50-day MA, NLY is now a BUY.

Peritus High Yield ETF (HYLD) rose 0.53%. Some pundits are again wondering if high-yield corporate debt is overvalued after such a strong run. But with investors having few other options when it comes to finding yield with the Federal Reserve committed to keeping rates low for a couple more years, this bull has more to go. Hitting a new 52-week high, HYLD is a BUY.

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Northern Tier Energy Trust LP (NTI) rose 0.75%. The company announced overnight that it has commenced an underwritten public offering of 9,000,000 common units. Such offerings usually dilute existing shareholders and hit the stock price over the short term. NTI remains a BUY.

Apollo Residential Mortgage Inc. (AMTG) rose 0.98%. Your $0.70 per share of common stock is on January 31, 2013, as long as you held the stock on December 31, 2012. AMTG is a BUY.

SPDR S&P Emerging Markets Dividend ETF (EDIV) recovered 0.38%. Gaining 4.00% year to date, this bullish bet on emerging markets is a BUY.

UBS E-TRACS 2x Wells Fargo Bus Dv Cm ETN (BDCL) tumbled 4.99%, after hitting a fresh 52-week high on Monday. This is a leveraged bet, so it will be more volatile than your average holding. But strap yourself in as BDCL remains a BUY.

Market Vectors International High Yield Bond ETF (IHY) rose 0.69% during its first week in your portfolio. This high-yield play continues in a strong uptrend and remains a BUY.

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