(RTTNews) - Tuesday, Credit Suisse initiated coverage of MFA Financial, Inc. (MFA: News ) stock with an Outperform rating and a price target of $8. The brokerage established its 2009 EPS estimate of $1.09, and its 2010 estimate of $1.25.

Analyst Harter said that his price target reflects a 20% total return potential for MFA, with most of the return coming from the dividend, warranting his Outperform rating. The analyst sees upside to his earnings estimates and price target if MFA adds leverage to the non-Agency portfolio.

The analyst noted that MFA Financial is a mortgage REIT that invests across the residential mortgage securities market. MFA has focused on the Agency MBS market, but recently has had an increased focus on non-Agency bonds. By investing across the entire residential mortgage sector MFA has the flexibility to find the most attractive return opportunities.
The analyst sees upside to his EPS estimates if MFA adds leverage to grow its investment portfolio; each $100 million can add $0.03-0.05 to EPS. The analyst's price target of $8 is based on a 15% premium to current book value and a 15.4% dividend yield on the 2010 dividend. Both of these measures are discounts to MFA's historical valuations.

Currently, MFA is up $0.08 or 1.05% and trading at $7.73.

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by RTT Staff Writer

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