Capstead Mortgage, (CMO) -A Fed Interest Rate Beneficiary – Nov. 4, 2009

By Robert Hauver

Looking for a strong dividend paying stock that will benefit from the Fed’s historically low interest rate program?

With the recession apparently over, the Federal Reserve on Wednesday held a key interest rate at a record low and again pledged to keep it there for an “extended period” to foster the fragile economic recovery.

Capstead Mortgage, (CMO), a mortgage REIT from our High Dividend Stocks by Sector tables, (they’re in our Financials table), now yielding 17.79%, has the highest dividend yield in the Mortgage Investment sub-industry.  CMO invests in residential Adjustable Rate Mortgages issued and backed by U.S. government agencies, Fannie Mae, Freddie Mac, and Ginnie Mae.

They recently reported a modest decline in Q3 earnings, (down 3.44%), but increased their book value to $12.21 per common unit, which brings their current Price/Book to 1.05, in line with the other 3 high dividend stocks in their peer group: Hatteras Financial, (HTS), Annaly Capital, (NLY), and MFA Financial , (MFA), whose Price/Book values are running from 1.01 to 1.09.

CMO earned $.56/common unit in Q3 and declared a $.56 payout as well, in line with the high payout ratios mandated for REIT’s, in return for not paying corporate taxes.
Businesswire reported these comments from CEO  Andrew F. Jacobs:

To continue reading, click here…