3 High Yield Mortgage REITs Running Very Different Playbooks
Two Harbors (TWO) is pinned at $12 ahead of its $12 buyout, while Cherry Hill (CHMI) surged 21% on a merger with MITT offering a 29% premium. Invesco Mortgage (IVR) operates independently, paying a 19% annualized monthly dividend from an $8.2B Agency portfolio. Each REIT has distinct risk profiles and strategies.
How this was made
The 30-second read
Why it matters
Deal completions for TWO and CHMI create merger‑arbitrage plays, while IVR remains a pure‑play income vehicle.
Market read
Highlights distinct risk/return profiles in mortgage REIT space, useful for income investors and arbitrage traders.
What to watch
Potential regulatory changes to agency MBS could affect all three REITs.
Background
The article compares three high‑yield mortgage REITs with distinct strategies amid a 4.72% 10‑year Treasury yield.
Ticker impact
Two Harbors is being bought at $12 per share, price pinned to the deal after a 27% YTD gain.
Share price likely to remain near $12 until closing, then delist.
Buyout price is fixed and already reflected in the market.
Cherry Hill is being acquired by MITT in a stock‑and‑cash deal at a 29% premium.
CHMI price should stay elevated near the premium until the transaction closes.
Premium and clear swap terms drive the price action.
MITT is the acquirer in the CHMI transaction, issuing 0.3063 shares per CHMI share.
MITT may face modest pressure as shares are issued for the deal.
Share issuance size relative to market cap is modest.
Invesco Mortgage Capital remains an independent agency MBS REIT paying a 19% annualized dividend.
Price likely to track dividend yield and mortgage spread trends.
No deal catalyst; performance driven by market conditions.
Market effects
Mortgage REIT sector shows divergent risk profiles; merger arbitrage opportunities arise.
U.S. mortgage REITs may influence income‑focused funds and ETFs.
Limited to U.S. fixed‑income investors; no broader macro impact.
Counterpoint
IVR's high dividend may be unsustainable if prepayment speeds accelerate.
Key entities
- companyTwo Harbors Investment Corp.
Target of a cash buyout at $12 per share.
- companyCherry Hill Mortgage Investment Corp.
Being acquired by MITT with stock‑and‑cash consideration.
- companyTPG Mortgage Investment Trust
Acquirer of CHMI.
- companyInvesco Mortgage Capital Inc.
Standalone agency MBS REIT paying monthly dividends.
