4 Mortgage REITs Yield Over 10%. Are Their Dividends Safe?

Mortgage REITs show up near the top of almost every high-yield screen, and each of the four names below pays a double-digit yield. Their dividends come from a different source than the apartment, warehouse, and shopping-center REITs most retirees know, and that source moves with interest rates. The 10-year Treasury yields 4.86%, and every stock here pays far more. Whether each payout is safe depends on three things: earnings coverage, book value, and leverage.

How Mortgage REITs Earn Their Outsized Payouts

An equity REIT owns property and collects rent. Leases lock in its cash flow, and rent increases make it grow. A mortgage REIT owns loans or mortgage-backed securities instead. It makes the spread between the interest it collects and the interest it pays on borrowed money, then uses heavy leverage to multiply that spread into a big dividend.

That setup leaves the dividend exposed to three forces at once: funding costs, credit losses, and changes in the market value of the assets. When rates jump, the bonds a mortgage REIT holds lose value and book value falls. That is what happened last quarter. The Fed raised rates by 25 basis points at its September meeting, its first increase since 2023, and the 10-year yield rose 82 basis points during the quarter.

GAAP earnings include those paper swings, so EPS-based payout ratios give the wrong picture. A better measure is distributable earnings, also called earnings available for distribution (EAD). It tracks the cash spread the portfolio actually produces.

The four companies also work in different markets. AGNC Investment (NASDAQ:AGNC) and Annaly Capital Management (NYSE:NLY) focus on agency mortgage-backed securities, which are pools of government-backed home loans, so interest rates matter more to them than credit. Blackstone Mortgage Trust (NYSE:BXMT) makes commercial real estate loans, where credit losses drive results. Rithm Capital (NYSE:RITM) spreads its business across mortgage servicing, home loan creation, lending, and asset management.

AGNC Investment: Monthly Checks at a 16.3% Yield

AGNC yields 16.3% and pays monthly, which helps retirees line up income with their bills. The payout has been $0.12 on every ex-dividend date from April 2020 through October 2026. Before that, AGNC cut the dividend several times, from $0.22 to $0.20, then $0.18, then $0.16.

Coverage is thin. Third-quarter net spread and dollar-roll income came to $0.37 per share, compared with $0.36 in dividends declared. Tangible net book value fell 16.9% to $7.13, and leverage rose to 7.9 times tangible equity from 7.4 times. Liquidity gives some buffer: AGNC holds $6.3 billion of available cash and Agency MBS, equal to 57% of tangible equity. Hedges cover 90% of funding liabilities.

Bull case: Agency spreads finished the quarter near the upper end of their multi-year range, around 135 basis points over Treasuries. Management puts expected returns on new purchases at 18%–20%, and book value had risen 3% since quarter-end as of the call. Chief executive Peter Federico said, “Our dividend continues to be well-aligned with the economics of our business.”

Risk: At nearly 8x leverage, one bad quarter hits equity hard. The third-quarter economic return was-12.7%.

Annaly Capital Management: Earnings Still Outrun a Freshly Raised Dividend

Annaly yields 15.4% on a quarterly payout of $0.75. The board raised the dividend from $0.70 this year, after an earlier increase from $0.65. The longer record includes cuts, including a drop from $0.25 to $0.22 in 2020.

EAD of $0.80 covered the dividend in the third quarter. Book value per share fell to $17.86 from $20.15, and the economic return was negative 7.6%. Economic leverage rose slightly to 5.9x from 5.6x, and the hedge ratio reached 100%. Annaly also had about $8.5 billion of assets available for financing. Chief executive David Finkelstein said, “We are comfortable with where the dividend is today.”

Bull case: Annaly makes money from three businesses. Agency MBS accounts for 55% of capital, residential credit 23% and mortgage servicing rights 22%. Servicing rights gain value when rates rise, which partly offsets losses in the bond book. Annaly also completed a record $7.4 billion in securitizations during the quarter.

Risk: Management said markets were pricing nearly three additional 25-basis-point hikes through the end of next year. More rate volatility would put book value under pressure again.

Rithm Capital: Lowest Yield, Biggest Coverage Cushion

Rithm yields 10.6%, the lowest in this group, but its earnings cover the dividend by the widest margin. Third-quarter EAD was $0.55 per diluted share, compared with a $0.25 dividend. Management reported 28 consecutive quarters of EAD exceeding dividends paid. The payout has held at $0.25 every quarter since late 2021. Management rebuilt that level after a 2020 cut from $0.50 to $0.05.

Its financial position is solid. Book value per share is $12.51, while the stock trades at $9.44. Rithm ended the quarter with $1.9 billion in cash and liquidity.

Bull case: Newrez posted a 24% annualized operating ROE, and its servicing book covers $878.9 billion of loans. Servicing rights do better when rates stay high. The asset management arm runs about $61 billion and drew $569 million in new inflows, which adds fee income that does not depend on mortgage spreads. Chief executive Michael Nierenberg put it: “We do not need to originate a mortgage to make money.”

Risk: Higher rates are hurting creation. Management expects production to fall close to 25% from September to October, and competition is squeezing gain-on-sale margins.

Blackstone Mortgage Trust: A Reset Dividend Built to Hold

Blackstone Mortgage’s headline yield of 16.4% reflects the old payout. The board cut the fourth-quarter dividend to $0.30 from $0.47, which brings the annualized forward amount to $1.20. Management cited an 11% current yield. This is the second cut since 2024, following a reduction from $0.62.

Distributable earnings were $0.38 per share, or $0.42 before realized losses. That covers the new dividend but would have fallen short of the old one. Book value fell to $17.06 from $19.31 after a $264.8 million addition to loan-loss reserves, which now total $606 million. Funding is stable: $1.3 billion of liquidity, 89% of debt free of mark-to-market calls, and a leverage ratio of 3.9 times. Chief executive Tim Johnson said the new dividend is “sustained through a range of rate and credit environments.”

Bull case: Watchlist loans fell 56% to $900M, the lowest level since Q4 2019. The stock trades at $11.18, well below book value, after a 35.94% year-to-date fall. Buybacks of $36M show management views the stock at these prices.

Risk: Impaired loans and owned real estate still make up about 14% of the portfolio, and the Chicago office loan has not been resolved.

Who Should Own Mortgage REITs

Mortgage REITs suit income investors who want the most cash flow today and can handle swings in book value and share price. Rithm and Annaly currently cover their dividends by the widest margins. AGNC offers monthly checks with a thin buffer, and Blackstone Mortgage is rebuilding around a lower payout. Double-digit yields always deserve a second look before you buy them (we laid out the seven warning signs that a big payout is about to be cut in a free dividend trap guide). Retirees who need a dividend that never changes, or who rely on stable principal, are better served by equity REITs and bonds.

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