Oct. 31, 2025 7:53 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , 1 Comment
Summary
- Dividends matter. So do losses. Look at a couple of charts and call it a day.
- Most people don’t want to go through all the history, but we can sum up over a deca…
Oct. 31, 2025 7:53 AM ET, , , , , , , , , , , , , , , , , , , , , , , , , , , , , 1 Comment
Summary
- Dividends matter. So do losses. Look at a couple of charts and call it a day.
- Most people don’t want to go through all the history, but we can sum up over a decade in a few images.
- When we compare prices and book value over time, we can see that the huge dividends were not enough. They still are not enough.
- Looking only at the dividend yield is not due diligence any more than looking at a dictionary cover makes someone well spoken.
Halloween is boring. Rescuing dogs is great.
EyeEm Mobile GmbH/iStock via Getty Images
It’s been a few weeks, but earnings season is extremely busy. I’ve got something I want to share with all our readers though.
I’ve been a critic of the absurd premium achieved by AGNC Investment (AGNC) over the last few years. While this example uses AGNC, it is highly relevant to the sector. One of the things investors should regularly do when evaluating prices is look at the ratios over time. If you have no idea where valuations have been in the past, it would be extremely difficult to evaluate current valuations.
Analysis Strategy
We’re constantly working on providing new updated estimates for BV (book value) and NAV (Net Asset Value) in The REIT Forum. However, many investors fail to even compare the trailing values. In this series, we calculate the price-to-trailing BV or NAV for many mortgage REITs and BDCs, as well as providing several metrics on baby bonds and preferred shares. Charts for those things are available near the end of the article.
We emphasize price-to-BV and price-to-NAV because those metrics provide insight into valuations.
History In a Chart
I get it. Most people didn’t like their classes on history. I’ll keep it short. Just a few images.
Since mortgage REITs and BDCs are heavily reliant on book value, we use charts for price-to-book. Everybody seems to like AGNC today, but would they love the history?
AGNC has the highest premium to projected book value (our internal estimates of current book value) among the mortgage REITs. However, agency mortgage REITs (the ones focused on agency MBS) are generally trading at higher than normal price-to-book ratios.
On the other hand, price-to-book ratios for most of the other types of mortgage REITs have been thoroughly crushed. About the only hybrid mortgage REIT that is trading near book value is Ellington Financial (EFC).
I wanted to compare the price-to-book ratios over a long period for AGNC and one of the hybrid mortgage REITs, but I didn’t want to use EFC. At least not at first. We’re going to use MFA Financial (MFA).
Note: BV (Book Value) and NAV (Net Asset Value) can be used interchangeably here. That isn’t the case for all investments, but it works here.
This is the chart that drives the article:
The REIT Forum
Investors who have never read my content may not be familiar with novel ideas. However, we are happy to introduce them.
There is nothing inherently special about “1 share”. You can perform the same kind of analysis using a base of 10 shares or a base of 0.60 shares. If you want to compare two similar investments, you would normally be considering an equal dollar amount of shares. Okay, this is not novel. This is pretty basic. Let’s just get into the chart.
What you’re seeing here shows that as of Q2 2025 earnings (MFA hasn’t released Q3 2025 values yet), MFA actually protected book value much more effectively than AGNC. Starting at almost any point on the chart, you would find MFA protected book value more effectively than AGNC.
Despite that, MFA trades at a dramatic discount to book value and AGNC trades at a dramatic premium. Is it because AGNC offers a bigger dividend yield? Well, is 14.4% for AGNC bigger than 16.1% for MFA? No, it’s not. Well, that was pretty easy.
It is true to say that if both traded at book value, then AGNC would have a much higher dividend yield. That is a special statement because it meets two criteria:
- True
- Useless
Let’s try to find some statements that are useful.
I find it quite interesting that around the middle of 2021, both of these mortgage REITs traded roughly in line with book value. Since then, AGNC’s book value got demolished. They lost vastly more than MFA.
Now, as fun as that chart is, there is one potential downside. It has 4 lines. Who wants to keep track of 4 lines at once?
Okay, we created another one that just uses the ratio. This tracks the price to trailing book value.
The REIT Forum
Well, when you look at it that way, it’s pretty clear that AGNC is trading at exceptionally high valuations. It isn’t the highest level they’ve ever recorded, but it is pretty high.
Dumb Things Investors Say
So when investors say AGNC has so much upside, I have to ask what upside they mean.
Do they think the price-to-book ratio is going to go higher? Will it just shatter 10 years of history, even as AGNC prints new shares to capitalize on the high price?
Oh, am I wrong? AGNC’s board of directors wouldn’t even consider issuing new shares? Well, delusions can meet facts:
TIKR
Hey look, that chart goes up and to the right!
So it isn’t price-to-book that’s going higher. Is it the book value?
Let’s eliminate MFA from the first chart so we can focus on AGNC’s share price and NAV:
The REIT Forum
Oh look, it goes down and to the right!
To be clear, issuing shares is not what caused book value to go down. The shares outstanding have surged while valuations were favorable for issuing shares. The valuation is still favorable - FOR ISSUING SHARES. It’s not favorable for buying shares. Just for issuing them.
Three Facts
Understand these three things:
- The price-to-book ratio is important. It is near the records for the company.
- Book value is unlikely to surge vastly higher. The only huge increase we’ve seen in 11 years was right after the pandemic. Interest rates remained very low for a while as the spreads between MBS and Treasuries declined. That enabled agency mortgage REITs to report large gains in book value. Even in that dream environment, shares rarely traded at a material premium to book value.
- Math is real.
What About Other Mortgage REITs?
Some are different. Some trade at lower price-to-book ratios. Sometimes vastly lower. That’s entirely possible.
The lesson you should take away from this is to be wary of large premiums to NAV for most investments. Most are not Main Street Capital (MAIN). Most do not sustain massive premiums indefinitely.
Most of the time, a 14% yield is more than enough for income. Sometimes, like with AGNC trading at a huge premium to book value, it is not enough. However, looking at the dividend yield is never enough to constitute doing due diligence.
All The Stocks
The charts compare the following companies and their preferred shares or baby bonds:
- BDCs: (CSWC), (BXSL), (TSLX), (OCSL), (GAIN), (TPVG), (FSK), (MAIN), (ARCC), (GBDC), (OBDC), (SLRC)
- Commercial mREITs: (GPMT), (FBRT), (BXMT)
- Residential Hybrid mREITs: (MITT), (CIM), (RC), (MFA), (EFC), (ADAM)
- Residential Agency mREITs: (NLY), (AGNC), (CHMI), (DX), (TWO), (ARR), (ORC)
- Residential Originator and Servicer mREITs: (RITM), (PMT)
Note: NYMT recently changed their ticker to ADAM. The new ticker is included in our charts. The baby bonds and preferred shares also changed tickers with NYMT being replaced by ADAM within each ticker. For instance, NYMTZ became ADAMZ.
Embedded Charts
Note: These charts are still using Q2 2025 BV values because several companies have not reported yet. Mixing Q2 2025 and Q3 2025 BVs would be dumb.
Mortgage REITs and BDCs:
| The REIT Forum | The REIT Forum | The REIT Forum |
| The REIT Forum | The REIT Forum | The REIT Forum |
Preferred shares and baby bonds:
| The REIT Forum | The REIT Forum | The REIT Forum |
| The REIT Forum | The REIT Forum | The REIT Forum |
| The REIT Forum | The REIT Forum | The REIT Forum |
Thanks for reading and I hope you enjoyed the charts.
Some terminology:
- FTF = Fixed-to-floating. Share is currently fixed but will begin floating based on SOFR. We may reference LIBOR, but that’s assumed to be SOFR + 0.26161%.
- FTR = Fixed-to-reset. Share is currently fixed. It will eventually begin resetting every 5 years based on the 5-year Treasury rate.
- FTL = Fixed-to-lawsuit. The company decided that their FTF shares could be “fixed-to-fixed” despite clearly violating the original intent of the contract.
- Floating = A share that was FTF, but is now floating. The dividend rate is updated every 3 months.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
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**Analyst’s Disclosure:**I/we have a beneficial long position in the shares of RITM-D, EFC-B, PMTW, PMT-A, PMTV, TWO-A, RITM-E, RITM, GPMT, RC, GBDC, CIM, BXSL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Colorado Wealth Management Fund and Scott Kennedy are supporting contributors for The REIT Forum. Our ratings and outlooks will often overlap. Any recommendation posted in this article is not indefinite. We closely monitor all of our positions. We issue Buy and Sell alerts on our recommendations, which are exclusive to our members. I have an indirect conflict of interest with ABR and STWD. Neither I, nor any contributor for The REIT Forum, will provide investment advice, reply to questions, or engage in discussions regarding these two mREIT stocks.
Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.