UPDATE 1-Capstead Mortgage Q1 profit beats analysts view

* Q1 EPS $0.58 vs analysts view of $0.54

* Q1 total interest income $88.1 million

* Says may raise more capital in future periods

April 30 (Reuters) - Capstead Mortgage Corp (CMO.N) posted higher-than-expected quarterly profit, helped by lower borrowing rates and higher prices for its residential-mortgage securities due to recent government actions.

"As anticipated, interest rates on our short-term borrowings declined considerably during the first quarter, resulting in a pronounced expansion in our net interest margins," Chief Executive Andrew Jacobs said in a statement.

The company said it expects the core investment strategy of managing a conservative portfolio to produce attractive risk-adjusted returns over the long term. The real-estate investment trust reported a net income of $42.1 million, or 58 cents a share, compared with $30.1 million, or 53 cents a share, a year ago.

Interest income for the quarter stood at $88.1 million from $107.2 million, last year.

Analysts had expected the company to earn 54 cents a share, on revenue of $86.7 million, according to Reuters Estimates.

In March, the company raised its first-quarter dividend to 56 cents a share from 36 cents a share declared in the December quarter. In December, Capstead had reduced its dividend to 36 cents from 55 cents. [ID:nBNG433271]

The company also said greater demand and higher prices for residential-mortgage securities resulted in improved book value and led to availability of financing for its portfolio. Mortgage agency REITs look to borrow from short-term markets at a lower rate, and invest its equity capital and borrowed funds in long-term instruments like agency mortgage-backed securities (MBS) at a higher rate to make a profit.

Most of the company's investments are in agency MBS. U.S. agency MBS are securities that are obligations guaranteed by the U.S. government or its agencies, such as Fannie Mae (FNM.N) (FNM.P) or Freddie Mac (FRE.N) (FRE.P).

Shares of the company closed at $11.39 Thursday on the New York Stock Exchange. (Reporting by Archana Shankar in Bangalore, Editing by Dinesh Nair)