The income-generating asset class fell into the spotlight this month. And it may be attractive to investors who take some risk in exchange for a large dividend yield. Mortgage Real Estate Investment Trusts hold mortgage and mortgage-backed securities. They lend money to developers and other stakeholders across a range of real estate properties and invest in mortgages. They are different from equity REITs, which buy real estate and collect rent from tenants. Earlier this month, Mortgage REITS cried out from legendary investor Bilgross who posted on social media platform X. In fact, AGNC Investments advertises its current dividend yield by 14%, with the share price rising by around 12% in 2025. However, investors need to resist the urge to simply plunge into space as they seek outperformance and income when the market is rocky. “You need to understand what you’re buying,” said Philip Blankert, chief market strategist at wealth management company OSAIC. “There are scenarios where you can get lashed out with these things.” The greater risk, richer yields, mortgage REITs have different risk profiles compared to their stock REIT cousins. First of all, they can be very useful. That is, they use a lot of debt to buy a mortgage. This leverage can amplify returns, but it can also increase the risk profile, Blancato said. According to Matthew Malone, Opto Investments’ Head of Investment Management, a mortgage REIT is 5-7x leveret, or five-part debt for one part. The risk, or duration of interest, results in another component of risk. Longer mortgages offer a higher yield prospect, but they are also exposed to interest rate fluctuations. This sensitivity to rate swings is known as duration. The quality of credit is also a major consideration. Mortgage REITs can choose to snap mortgages from agents that tend to be of high quality. A scenario with rising rates can be dangerous for mortgage REITs, Blancato said. “There are some train wreckages out there. The companies that made the wrong interest rate bet had to collect the principal, reset and then lever up again, which resulted in a longer period and had to go down to zero income payments,” he said. These risks should make investors think twice before playing in the space, especially if that portfolio income is needed. An environment with horizontal interest rates is suitable for mortgage REITs, Blankert said. Currently, its 10-year financial yield is trading at around 4.2%, with a January high of around 4.8%. The mortgage REITs that have been on track so far in 2025 include Annaly Capital Management. This is up nearly 19%, offering a dividend yield of nearly 13%, while Dynex Capital has an 11% increase with a dividend yield of 14.5%. Malone noted that names like Annaly and AGNC traded with net asset value at premiums, and that is another consideration for future investors. “If you can buy it with a discount on NAV, you might build a sense of gratitude,” he said. “It’s like this: Are you a yield buyer or are you looking for gratitude and yield?” Who is using them? Mortgage REITs are risky for individual investors to snap up, but institutional investors, including companies designing portfolios for wealth managers, may tap space as a diversifying device along with other income-generating investments. Those participating in the space should look to quality credit, shorter periods, and reasonable yields to understand the underlying portfolio of mortgage REITs. “Make sure they own a treasure trove and don’t seek the maximum yield for a relatively short period of time,” Blankert said. “Each of them have their own small niche that makes it interesting. If you get it wrong, lose 80% of your value in a few years, and the person who cares if you have an 11% dividend yield.” These REITs should not constitute a significant portion of a particular portfolio based on risk characteristics. “It’s sweet to coffee, but not coffee,” Blankert said.
These income-generating stocks break the market and offer rich yields
