Orchid Island Capital: 21% Yield on Cost and Potential Capital Gain

Orchid Island Capital, a REIT with a 21% yield on cost, has shown signs of improvement with a potential capital gain. Despite facing challenges earlier this year, the company's stock price has increased, making it an attractive investment option for those seeking a high yield and potential capital appreciation.

Orchid Island Capital (NYSE: ORC), a mortgage Real Estate Investment Trust (REIT), has shown signs of improvement in recent months, making it an attractive investment option for those seeking a high yield and potential capital appreciation. Despite facing challenges earlier this year, the company's stock price has increased, indicating a potential turnaround in its fortunes.

Orchid Island Capital employs a leveraged strategy utilizing U.S. Agency-backed single-family residential mortgage-backed securities, pass-through certificates, interest-only, and inverse interest-only securities, as well as principal-only securities. The company's complex investment strategy has made it a challenging investment for many, but recent developments suggest that the worst may be behind it.

In April, Orchid Island Capital's stock price was at a near 52-week low, with the share price hovering around $6.50. However, the company's stock price has since rebounded, closing at $7.19 on September 2, 2025. This increase, coupled with the company's high dividend yield of over 21%, has made Orchid Island Capital an attractive investment option for those seeking a high yield and potential capital appreciation.

One investor, who wrote an article forecasting that the worst was likely behind the company, entered into a position in ORC using a "buy-write" strategy. This strategy involved purchasing shares at $6.37 and writing calls at a strike price of $7.50 for 7/18/25 expiration on April 10th. The investor was able to purchase shares at a discount and set up an exit at a capital gain if the share price recovered. Since entering the position, the investor has collected monthly dividends of $.12 and has seen a return of 10.7% on their investment.

Despite the recent improvement, Orchid Island Capital still faces challenges. The company's highly leveraged and complex investment strategies can be risky, and the risk of a dividend cut cannot be ruled out. However, the company's recent performance suggests that the worst may be behind it, and the potential for high annualized returns makes it an attractive investment option for those with a risk appetite.

In conclusion, Orchid Island Capital has shown signs of improvement in recent months, making it an attractive investment option for those seeking a high yield and potential capital appreciation. However, the company's complex investment strategies and the risk of a dividend cut should be taken into account. As always, investors should conduct their own research and consider their risk appetite before making any investment decisions.

References:
[1] https://seekingalpha.com/article/4820833-orchid-island-capital-orc-stock-yield-on-cost-and-capital-gain
[2] https://www.orchidislandcapital.com/news-releases/news-release-details/orchid-island-capital-announces-september-2025-monthly-dividend