Angel Oak Mortgage REIT's Surging Earnings and Strategic Growth: A Compelling Buy for Income-Focused Investors in a Stabilizing Interest Rate Environment

In a market where volatility has long defined the mortgage REIT sector, Angel Oak Mortgage REIT, Inc. (AOMR) has emerged as a beacon of resilience and strategic foresight. With interest rates showing early signs of stabilization and investors seeking reliable income streams, AOMR's recent financial performance and capital deployment strategies position it as a compelling opportunity for those prioritizing both yield and growth.

A Remarkable Earnings Turnaround

AOMR's second-quarter 2025 results underscore a dramatic reversal of fortune. The company reported a net income of $0.8 million, or $0.03 per diluted share, compared to a net loss of $0.273 million (or $0.01 per share) in the same period of 2024. This represents a 400% year-over-year increase in GAAP earnings per share—a metric that rarely sees such explosive growth in the REIT space. The improvement is even more striking when considering the broader context: the mortgage REIT sector has historically struggled to maintain consistent profitability amid shifting rate cycles.

The driver behind this turnaround? A disciplined approach to capital deployment. AOMR's net interest income surged by 5.0% year-over-year to $9.9 million, reflecting its ability to optimize its balance sheet even in a high-interest-rate environment. The company's issuance of $42.5 million in senior unsecured notes in May 2025, coupled with two securitizations, allowed it to refinance debt at favorable terms while unlocking cash for new investments. These actions not only improved liquidity but also reduced leverage, a critical factor in maintaining credit ratings and investor confidence.

Strategic Loan Acquisitions and Securitizations: Fueling Growth

AOMR's second-quarter activities reveal a company that is both proactive and selective in its pursuit of value. The two securitizations—AOMT 2025-4 and AOMT 2025-6—were not mere transactions but calculated moves to reshape its portfolio. The first, a $284.3 million securitization in April 2025, enabled AOMR to repay $242.4 million in debt while retaining $24.7 million in cash for new loan purchases. The second, a $349.7 million securitization in May 2025, further strengthened its capital structure by repaying $73.1 million in debt and freeing up $9.2 million in liquidity. These actions demonstrate AOMR's ability to leverage its relationships with other Angel Oak entities to execute complex capital markets strategies efficiently.

Equally impressive is AOMR's focus on acquiring high-quality residential mortgage assets. In Q2 2025, the company added $146.6 million in non-QM (non-qualified mortgage) loans and HELOCs with a weighted average coupon of 8.68%. This is a critical advantage in a stabilizing rate environment: higher-coupon loans generate more income when rates plateau, reducing the drag from prepayments and interest rate volatility. The portfolio's weighted average coupon now stands at 8.37%, a 66-basis-point increase from the prior year—a testament to AOMR's ability to source attractive assets even in a competitive market.

Why This Matters for Income-Focused Investors

The stabilizing interest rate environment is a pivotal backdrop for AOMR's current trajectory. With the Federal Reserve signaling potential rate cuts in 2026 and mortgage rates likely to remain elevated for the foreseeable future, REITs that can lock in high-yielding assets while managing duration risk will outperform. AOMR's strategy—focusing on non-QM loans with strong credit metrics (757 average credit scores, 68.4% CLTV ratios) and leveraging securitizations to maintain flexibility—positions it to thrive in this scenario.

Moreover, AOMR's recent dividend declaration of $0.32 per share, to be paid on August 29, 2025, reinforces its commitment to shareholder returns. For income-focused investors, this represents a yield of approximately 7.5% based on its current stock price, a figure that becomes more attractive as traditional fixed-income assets remain under pressure. Notably, AOMR has maintained a consistent dividend of $0.32 per share over the past year, demonstrating its ability to deliver reliable returns even amid market fluctuations. Historical data also shows a dividend yield of 13.57% as of June 2021, underscoring its long-standing appeal for income seekers. However, investors should consider its payout ratio of 0.85 and a dividend cover of 2.0, which indicate both the sustainability of current distributions and the potential for future growth if earnings expand.

A Buy for the Long Term

While no investment is without risk—particularly in a sector as sensitive to interest rates as REITs—AOMR's recent performance and strategic execution make it a standout. Its ability to turn a net loss into a profit in just one year, combined with a disciplined approach to debt and asset acquisition, suggests a management team that is both agile and focused on long-term value creation.

For investors seeking income with growth potential, AOMR offers a rare combination: a high-yield dividend, a robust balance sheet, and a playbook that aligns with the current macroeconomic climate. As interest rates stabilize and the housing market adjusts to new norms, AOMR's strategic positioning could unlock further upside, making it a compelling addition to a diversified portfolio.

Final Takeaway: In a market where certainty is elusive, Angel Oak Mortgage REIT's surging earnings and strategic capital deployment provide a clear roadmap for growth. For income-focused investors, this is a rare opportunity to capitalize on a REIT that is not only surviving but thriving in a shifting landscape.