Western Asset Mortgage Capital Corporation
Western Asset Mortgage Capital Corporation (NYSE:WMC) is an mREIT, meaning it invests in residential mortgage-backed securities for which principal and interest payments are guaranteed by the government. So I like that Uncle Sam is on the hook here.
The way mREITs make their money is via arbitrage, so they borrow money at a lower rate than their portfolio yields. As long as interest rates remain low — and that will be the case for a long time — that arbitrate should hold firm. They carry more leverage than I’d ideally like, but then again, they’re paying 17.5% dividend to offset that risk.
I think this is also worth looking at but, again, only as the speculative part of a diversified portfolio.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.