Orchid Island Capital Reports Strong Q3 Earnings Growth
Thanks to lower home price growth, rising inventory, and easing mortgage rates, the U.S. real estate market has shifted towards a more buyer-friendly market. For 2026, analysts expect home prices to gradually rise and stable rates to continue throughout the year. That’s good news for those looking to get on the property ladder and for mortgage real estate trusts (mREITs) like Orchid Island Capital Inc (NYSE:ORC).
And with the current federal funds rate in a range of 3.5% to 3.75%, mREITs are able to borrow capital at far lower interest rates than what the mortgages are actually paying.
Orchid Island Capital is an mREIT that invests in residential mortgage-backed securities (RMBS) on a leveraged basis. The income it generates for distribution to its shareholders comes from the difference between the yield on its mortgage assets and the costs of borrowing. (Source: “Q3 2025 Earnings Presentation,” Orchid Island Capital Inc, October 23, 2025.)
The company’s portfolio is made up entirely of highly liquid agency fixed-rate pass-through securities, interest-only securities, and principal-only securities. Agency pass-throughs are generally fixed-rate 30-year and 15-year securities in specified pools or to-be-announced (TBA) form.
Combined with its hedge positions, the portfolio has a very modest sensitivity to interest rates.
A “Strong Liquidity Position”
For the third quarter ended September, 2025, Orchid Island reported net income of $72.1 million, up 317% from the $17.3 million recorded in the same prior-year period. Net interest income increased $16.1 million to $26.9 million, or $0.20 per common share. (Source: “Orchid Island Capital Announces Third Quarter 2025 Results,” Orchid Island Capital Inc, October 23, 2025.)
The yield on the mREIT’s average agency RMBS increased from 5.38% in the second quarter of 2025 to 5.65% for the third quarter of 2025. At the same time, borrowing costs increased from 4.23% for the second quarter of 2025 to 4.45% for the third quarter of 2025.
During the quarter, Orchid received $212.8 million in scheduled and unscheduled principal repayments and prepayments.
Orchid continues to maintain a strong liquidity position of $620.0 million in cash and cash equivalents and unpledged securities, or approximately 57% of stockholders’ equity.
Commenting on the first-quarter results, Robert E. Cauley, chairman and chief executive officer, said, “Market conditions during the quarter were supportive for levered Agency RMBS investors such as Orchid Island Capital. Interest rates were quite stable outside of short-term rates, which declined in anticipation of additional interest rate cuts beyond the 25-basis point cut that occurred in September.”
Cauley added that the likely benefits from the One Big Beautiful Bill Act, deregulation, capital expenditure, and artificial intelligence should be supportive of growth in the near future.
“The path for economic growth, monetary policy and interest rates is uncertain, yet we believe Orchid’s portfolio is positioned to deliver attractive return potential in either scenario.”
Monthly Dividend of $0.12/Share Maintained
As an mREIT, Orchid Island Capital has to legally distribute at least 90% of its taxable income to shareholders in the form of a dividend. In the third quarter, book value increased by $0.12 per share. The increase in book value reflects net income of $0.53 per share and a dividend distribution of $0.36 per share.
This works out to a monthly distribution of $0.12 per share, or $1.44 on an annual basis, for a current forward dividend yield of 19.5%. (Source: “Dividend History,” Orchid Island Capital Inc, last accessed January 5, 2026.)
Aggressive Share Repurchase Program
In addition to a reliable high-yield monthly dividend, Orchid also has a strong share buyback program. In 2022, the board of directors approved an increase in the number of shares of Orchid Island’s stock repurchase program to 6.18 million shares, representing approximately 18% of the company’s then-outstanding shares of common stock.
As of October 23, 2025, the day the company released its third-quarter financial result, there were 2,719,137 shares left in the repurchase program. This stock repurchase program has no termination date.
From the inception of the stock repurchase program in 2015 through September 30, 2025, Orchid repurchased a total of 6,257,826 shares at an aggregate cost of approximately $84.8 million, for a weighted average price of $13.55 per share.
ORC Stock Up 20%+ Over Last Six Months
Strong financial results have been helping juice ORC stock considerably higher. ORC rose 15% over the last three months, 20% over the last six months, and almost 21.5% over the last year.
The stock is also up close to 60% since early April 2025, which is when President Donald Trump unveiled his global tariff policies.
Chart courtesy of StockCharts.com
The Lowdown on Orchid Island Capital Inc
Orchid Island Capital is a great mREIT with a growing portfolio of RMBS.
While there are concerns about the Fed’s current interest-rate path and whether the rate will get cut as quickly as President Trump would like, Orchid Island’s agency securities are generally fixed-rate 30-year and 15-year securities.
Its hedges, meanwhile, have a longer duration bias, which protects the portfolio against an unanticipated rise in longer-term rates.
On the plus side, lower interest rates are still good for Orchid Island, because the mREIT can borrow money at much better terms. All of this is good news for Orchid Island and its monthly dividend.