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Capstead Mortgage- (CMO)- formed in 1985 and based in Dallas, Texas, is a self-managed real estate investment trust for federal income tax purposes. Capsteads core strategy is managing a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of residential adjustable-rate mortgage, or ARM, securities issued and guaranteed by government-sponsored entities, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae. Agency-guaranteed residential mortgage securities carry an implied AAA credit rating with limited, if any, credit risk. Capstead may also augment its core portfolio with investments in credit-sensitive commercial real estate-related assets. As a REIT, capital gains are accounted for differently, so please consult with a tax advisor. We believe the dividend has significant risk at being cut.
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