Orchid Island Capital: Get Paid Monthly by This 20%-Yielder?
July 7, 2025
mREIT Reports Solid Q1 Results
U.S. real estate is a buyers’ market, with more sellers than buyers. And, with 30-year average mortgage rates hovering near 6.8%, it continues to be a great time for lenders. Even when interest rates, which impact mortgage rates, do start to come down, it is expected to be slow and measured.
While most people don’t like higher interest rates, they are good for businesses that loan out money, a mortgage real estate trust (mREIT) like Orchid Island Capital Inc (NYSE:ORC) in particular.
And with the current federal funds rate in a range of 4.25% to 4.5%, 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: “Q1 2025 Earnings Presentation,” Orchid Island Capital Inc, April 25, 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.
Attractive Returns with Orchid Island Capital?
For the first quarter ended March 31, 2025, Orchid Island reported net income of $17.1 million, or $0.18 per share. Its net interest income increased to $19.7 million, or $0.21 per share. (Source: “ORCHID ISLAND CAPITAL ANNOUNCES FIRST QUARTER 2025 RESULTS,” Orchid Island Capital Inc, April 24, 2025.)
The yield on the mREIT’s agency RMBS increased from 5.38% in the fourth quarter of 2024 to 5.41% for the first quarter of 2025. At the same time, its borrowing costs decreased from 4.98% for the fourth quarter of 2024 to 4.29% for the first quarter of 2025.
During the quarter, Orchid Island received $133.0 million in scheduled and unscheduled principal repayments and prepayments.
The mREIT maintained a strong liquidity position of $446.5 million in cash and cash equivalents and unpledged securities, or approximately 52% of stockholders’ equity.
Commenting on the first-quarter results, Robert E. Cauley, Orchid Island’s chairman and chief executive officer, said, “While economic data and events generally are never uniformly stable or consistent, the first quarter of 2025 was relatively uneventful. Interest rates were generally range bound, and volatility was low for most of the first quarter.”
Cauley concluded, “These are ideal conditions for a levered investment strategy in Agency RMBS. Accordingly, the company and the Agency RMBS market generated attractive returns for the period.”
The company didn’t provide any guidance, but Wall Street expects Orchid’s earnings to improve significantly over the next two years, rising from a loss of $0.71 per share in 2024 to $0.53 per share in 2025 and $0.69 per share in 2026. There are high earnings estimates for 2025 and 2026 of $0.63 and $0.88 per share, respectively. (Source: “Orchid Island Capital, Inc. (ORC),” Yahoo! Finance, last accessed June 20, 2025.)
Maintains Monthly Dividend of $0.12/Share
As an mREIT, Orchid Island has to legally distribute at least 90% of its taxable income to shareholders in the form of a dividend. In the first quarter, it paid a dividend of $0.36 per share, or $0.12 per share on a monthly basis. This works out to an annual distribution of $1.44 per share, for a current forward dividend yield of 20.43%. (Source: “Dividend History,” Orchid Island Capital Inc, last accessed June 20, 2025.)
The Lowdown on Orchid Island Capital Inc
Orchid Island is a mortgage REIT with a growing portfolio of RMBS. In the first quarter, the company increased its agency RMBS portfolio to $5.9 billion, with interest income climbing more than $9.0 million.
While there are concerns about the Federal Reserve’s current interest rate path and whether it will get cut as quickly as President Donald Trump would like, Orchid Island’s agency securities are generally fixed-rate 30-year and 15-year securities.
The mREIT’s hedges, meanwhile, have a longer duration bias that 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 it can borrow money at much better terms. All of this is good news for Orchid Island Capital Inc and its monthly dividend.
It’s also good news for the 188 institutions that hold a 31.04% stake in outstanding ORC shares. Three of the biggest holders include BlackRock Inc, The Vanguard Group, and Invesco Ltd. (Source: “Orchid Island Capital, Inc. (ORC),” Yahoo! Finance, last accessed June 20, 2025.)
