9.5% Dividend Yield Looks Great Until You Keep Reading From Cherry Hill Mortgage

Cherry Hill Mortgage Investment Corporation’s CHMI-A preferred shares offer a 9.45% yield but carry the highest risk rating of 5 in our coverage. CHMI-A is significantly overpriced, trading at 117.5% of our buy target; we require a materially higher yield for this risk. The common equity cushion for CHMI-A is only 0.92x preferred liquidation, offering minimal protection compared to peers like NLY (7.02x). CHMI-A may only suit investors with very high risk tolerance; numerous better-valued preferred shares and baby bonds are available.

We will be looking at one of Cherry Hill Mortgage Investment Corporation’s ( CHMI ) preferred shares: CHMI-A ( CHMI.PR.A ). At a quick glance, CHMI-A may look attractive because of the dividend yield. Shares currently have a stripped yield around 9.45%. That looks like a lot of income. There's just one tiny problem. We think investors should be looking for substantially more yield for taking on a significant amount of risk. CHMI-A carries our highest risk rating of 5 (very rarely we may use a 5.5 or 6.0, but those are pretty extreme cases). Out of all the preferred shares and baby bonds we cover, very few hold a risk rating of 5. But for some reason investors are buying CHMI-A today for a yield just under 9.5%. High risk without enough yield is not an attractive combination.

A 9.45% yield sounds great in isolation. However, investors shouldn't evaluate preferred shares in isolation. We cover 64 preferred shares and baby bonds across the mortgage REIT sector. One of the biggest strategic advantages we have when investing in preferred shares is the number of preferred shares and baby bonds we cover. We believe it’s very important to look at relative valuations and make a decision based on dozens of preferred shares. If you’re only ever watching one share, you will miss out on great deals. We've recently covered preferred shares from: Annaly Capital Management ( NLY ) AGNC Investment Corp. ( AGNC ) Rithm Capital ( RITM ) Chimera Investment Corporation ( CIM ) Those comparisons matter because investors should ask whether the yield is high enough to justify the risk when looking at CHMI-A. Our answer is no. Not even close.

In the first chart we posted, you can see CHMI-A recently traded around $21.97. Even though shares are trading well below their $25.00 call value, we have them at 117.5% of our buy target. Shares would have to drop all the way to $18.69 for us to view them as a buy. Prices would have to be $20.43 or higher for us to consider them overpriced. CHMI-A decided to fly straight through that threshold. If we haven’t pointed it out enough yet, CHMI-A is grossly overpriced.

We cover 18 mortgage REITs. CHMI is the second-smallest mortgage REIT we cover. The only smaller mortgage REIT in our coverage is Granite Point Mortgage Trust ( GPMT ), and that’s in the commercial mortgage REIT sector. Among the agency and hybrid mortgage REITs we cover, CHMI is the smallest. Being small doesn't automatically make a mortgage REIT (or their preferred shares) a bad investment. However, it is one factor to consider when evaluating the company and their preferred shares. Out of all the agency mortgage REITs we cover, CHMI carries the highest risk rating of 4.5. More importantly, in case you forgot, CHMI-A carries a risk rating of 5. On August 9, 2026, CHMI and TPG Mortgage Investment Trust ( MITT ) signed a definitive merger agreement, announced August 10 . If the merger closes, each share of CHMI-A will be automatically converted into one newly issued share of MITT’s Series D preferred stock with the same rights and preferences. We cover MITT preferred shares, and they are also sig...