| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 21300.91 | 390027 |
| Intrinsic value (DCF) | 53.27 | 876 |
| Graham-Dodd Method | n/a | |
| Graham Formula | n/a |
Ellington Residential Mortgage REIT (NYSE: EARN) is a specialized real estate investment trust (REIT) focused on acquiring, investing in, and managing residential mortgage-backed securities (RMBS) and related real estate assets. The company primarily invests in agency RMBS (including agency pools and collateralized mortgage obligations) as well as non-agency RMBS, which include both investment-grade and non-investment-grade securities. Headquartered in Old Greenwich, Connecticut, EARN operates in the REIT - Mortgage industry, benefiting from tax-advantaged REIT status, which exempts it from corporate income tax on distributed earnings. With a market capitalization of approximately $210 million, EARN provides investors exposure to the U.S. residential mortgage market while emphasizing yield through dividends, currently offering a $0.96 per share annual payout. The REIT’s performance is closely tied to interest rate movements, prepayment risks, and broader housing market trends, making it a niche but strategically positioned player in the mortgage REIT sector.
Ellington Residential Mortgage REIT (EARN) presents a high-yield investment opportunity with a dividend yield significantly above broader market averages, appealing to income-focused investors. However, its performance is highly sensitive to interest rate fluctuations and mortgage prepayment risks, as reflected in its beta of 1.336. The company’s lack of debt is a positive, but its small market cap and reliance on RMBS markets expose it to liquidity and credit risks. While EARN’s net income and operating cash flow remain positive, its revenue base is relatively modest ($15.1M in latest reporting), suggesting limited scalability. Investors should weigh the attractive dividend against macroeconomic risks, particularly Federal Reserve policy shifts impacting mortgage spreads.
Ellington Residential Mortgage REIT (EARN) competes in a niche segment of the mortgage REIT industry, focusing on residential mortgage-backed securities (RMBS). Its competitive advantage lies in its specialized expertise in structuring and managing agency and non-agency RMBS portfolios, allowing it to capitalize on pricing inefficiencies in these markets. Unlike larger diversified REITs, EARN’s concentrated focus on residential mortgages provides agility but also increases vulnerability to sector-specific risks, such as prepayment volatility and interest rate sensitivity. The company’s lack of leverage (zero debt) is a differentiator, reducing refinancing risks but potentially limiting returns in favorable rate environments. EARN’s small size ($210M market cap) restricts its ability to achieve economies of scale compared to peers like Annaly Capital (NLY) or AGNC Investment Corp. (AGNC), which benefit from larger balance sheets and diversified asset pools. Its tax-advantaged REIT structure aligns it with industry norms, but its performance heavily depends on management’s ability to navigate cyclical mortgage spreads and hedging strategies. While EARN’s dividend yield is competitive, its long-term sustainability hinges on stable RMBS cash flows, which are subject to macroeconomic headwinds.