Kalkine Media explores top mortgage stocks to explore amid rising rates

September 12, 2022 05:18 AM PDT | By Mridul Gogoi
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  • Invesco Mortgage Capital Inc. pays a dividend of US$ 0.9.
  • LendingTree posted Q2 2022 revenue of US$ 261.9 million.
  • Discover Financial Services has a market cap of US$ 28.005 billion. 

Mortgage rates in the US have soared for the third week. It has now peaked at the highest level since 2008. According to a Freddie Mac report, the average for a 30-year mortgage rose to 5.89 per cent, up from 5.66 per cent last week.

Higher mortgage rates may have sidelined potential home buyers, for instance. However, the lenders have much to gain from the rate hikes.

We take a look at five mortgage stocks- Invesco Mortgage Capital Inc. (NYSE: IVR), LendingTree, Inc. (NASDAQ: TREE), Discover Financial Services (NYSE: DFS), Rocket Companies, Inc. (NYSE: RKT), Citigroup, Inc. (NYSE: C), curated by Kalkine Media® and track their performances:

Invesco Mortgage Capital Inc. (NYSE: IVR)

Invesco Ltd. is an independent investment management REIT company based in Atlanta, Georgia. It offers finances and manages mortgage loans for residential and commercial properties.

The US$ 523.8 million company paid a quarterly dividend of US$ 0.9. IVR stock tumbled over 46 per cent year-to-date (YTD). However, it saw a rise of around two per cent as mortgage rates soared.

IVR stock touched its highest 52-week price at US$ 34 on November 5, 2021, while it hit the bottom price at US$ 9.63 on June 16, 2022.

Invesco’s second quarter 2022 net interest income was US$ 41.1 million, which was lower than the previous quarter’s US$ 44.3 million.

The company said that despite the reduction in leverage, its Q2 2022 EAD (earnings available for distribution) increased to US$ 1.4 per common share due to expanding net interest rate margin.

Invesco reported total average earnings assets of US$ 4.7 billion in Q2 2022. The average borrowing in the second quarter was US$ 4.1 billion.

LendingTree, Inc. (NASDAQ: TREE)

LendingTree is a US-based that operates an online loan market. It helps consumers find loans and other credits using its online tools and resources.

Over the past week, the TREE stock soared over 16 per cent. LendingTree has a market cap of US$ 460.9 million.

The company reported a second-quarter 2022 revenue of US$ 261.9 million compared to US$ 270 million in the same quarter a year earlier.

For the quarter that ended June 30, 2022, LendingTree’s total assets were US$ 422.093 million, whereas, in the quarter that ended December 31, 2021, total assets were US$ 374.437 million.

For its full-year 2022 guidance, LendingTree anticipates the revenue to be in the range of US$ 985 - US$ 1,015 million. The TREE stock had a Relative Strength Index (RSI) of 46.31 as of September 12, 2022.

Market capitalization of IVR, TREE, DFS, RKT,C Source: ©Kalkine Media®; © Canva via

Discover Financial Services (NYSE: DFS)

Discover Financial Services is a US bank that runs two segments-direct banking and the other is payment services. It issues credit and debit cards while giving out student and personal loans.

The fourth-largest payment bank in the US, Discover Financial, has a market valuation of US$ 28.005 billion.

Discover Financial Services also distributed a quarterly dividend of US$ 0.6 per share.

DFS stock surged over five per cent in the past week and last closed at US$ $102.52, up 1.45 per cent on September 9. The stock grew by over eight per cent quarter-to-date (QTD).

The second-quarter net income of Discover Financial Services was US$ 1.1 billion or us$ 3.96 per diluted share.

Discover’s total loans in the second quarter were US$ 99.3 billion, up 13 per cent year-over-year (YoY). Its credit card loans also grew 15 per cent YoY in the second quarter 0f 2022 to US$ 79.2 billion. 

Rocket Companies, Inc. (NYSE: RKT)

Earlier called Rock Financial, during its launch in 1985, Rocket Companies is a US financial services company based in Detroit, Michigan. It is best known for its Rocket Mortgage business, although the company offers a slew of services and products.

Rocket Companies has a market cap of US$ 928.5 million. For the quarter that ended June 30, 2022, Rocket Companies posted total assets of US$ 25.076 billion, compared to US$ 32.8 billion in the quarter that ended December 31, 2021.

Compared to net revenue of US$ 2.7 billion in the second quarter of 2022, Rocket Companies’ revenue was US$ 1.4 billion in the same quarter in 2021, which was an increase of over 92 per cent.

The company said its net income attributable to Rocket Companies in Q2 2022 was US$ 0.341 million relative to US$ 61.12 million in Q2 2021.

The RKT stock had an RSI value of 41.35 as per Refinitiv on September 12, 2022, pointing toward its volatile market condition.

Citigroup, Inc. (NYSE: C)

Citigroup is a global financial services company with operations in over 100 countries.

The New York-headquartered banking giant has a market valuation of US$ 98.13 billion. Citigroup distributes a quarterly dividend of US$ 0.51 per share.

Citigroup’s net income in the second quarter of 2022 was US$ 4.5 billion, a decrease of 27 per cent from the prior-year period due to a higher cost of credit and higher expenses. However, it was compensated by the growth in revenue.

The Citigroup stock saw a surge of over five per cent last week. The company’s second-quarter 2022 revenue of US$ 19.6 billion was an 11 per cent YoY increase, propelled by both net interest income (due to interest rate hike) and non-interest revenue.

Bottom line:

Although interest rate hikes have made these mortgage stocks look attractive, the current market scenario is quite volatile to predict anything. Investing in the stock market comes with a lot of uncertainty in 2022 as it remained highly tumultuous and bearish from the start of the year. Hence, investors should carefully analyze the fundamentals and prospects before making any decisions.


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