What kind of moron would invest in a Mortgage Reit at the top of its historical valuation.. Now is the time to start averaging in.. The market has already taken it down as everyone knows the dividend is "SUPPOSED TO BE CUT" ...
Historical facts are undisputable. What happens from here though? 2016 could be a very bad year for stocks and if so rates won't be raised again. Money could flow into REIT's as long as spreads are maintained.
Well, it is approximately 200 basis points from repo (or 3M libor) to the 10-year. That sounds pretty steep to me. That is probably close to (or a little higher than) the long-run average term premium.
1. Yes ROC reduces the capital available to trade, but they can and will raise more capital either thru increased leverage (issue another series of preferred), or issue common.
2. Remember to adjust the tax basis on your shares held for the ROC, adjust this in your records. If you paid $10 for a stock, they paid $1 return of capital, your basis is now $9. Sell for $10 even though you originally paid $10 and you have a $1 taxable gain to account for.
MREITS stocks are interest rate senitive.
From June 2004 to June 2006, Alan Greenspan boosted rates from 1% to 5.25%. Everyone knew it was coming, but NLY investors didn’t run for the exits until after it chopped its payout in mid-2005. I guess you were on eof these investors who didn't get out.
Looks like you do not understand that investing in these stocks are for the long term, not short term.
5-year performance at end 2015 was price 21.72 down to 9.38. Loss of -11.35. Over that time paid 8.39 in dividends. Net loss -$2.96/shr
10-year performance price was around 32 to 9.38. Loss of -22.62. Over that period paid 17.21 dividends. Net loss #$%$41/shr.
This was my result. How did you do?
I wonder why all the cheerleaders who voted Down on my post cannot do their own math. For the past five years NLY paid out 8.39 in dividends. Meanwhile the price went from 21.73 to 9.38, for a loss of -11.35 Anyone holding the stock thru that timeframe (lke me) lost nearly $3/shr. Even if we look back 10 yrs to sweep in the 'good years' with 8.82 dividends, the high price was around 32 so the combined dividends add up to 17.61 while the price dropped 22.62. That's a $5 loss per share! Yet these cheerleaders think that's going to improve in the future as rates rise? Preposterous. NLY's whole portfolio has fixed-rate yield (mortgages over the past decade) while their cost of borrowing is short-term and rising. This is a formula for inescapable grinding erosion of value. They MUST cut the dividend, if only to prolong the misery.
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Thanks for your input. I was reading an article that medical reits such as O, OHI, HCN, and HCP will continue to do fine even with interest rate hikes. These have paid dividends for a long time. I'm probably safe with this type of reit.
In 2014, my MReit ETF characterized 4c out of 10c distribution ( for each dollar of investment or NAV ) as Return OF Capital ( ROC) - different from Return ON Capital. My understanding is that - it means, in 2015 the Mreits had 4c less capital to invest - and with an avg leverage of 5:1, that means 20c less to invest out of each dollar of NAV - is that true ? Which means, interest income by the MReit will be 20/100 = 1/5 lower - all things being equal. If MReits want to maintain same distribution, they will have to distribute even MORE as ROC - which means even less capital next year. Looks like a SLIPPERY SLOPE to me. DR Klumps or any MReit expert - is my math wrong ?
Mort is a fund of mReits which diversifies away individual stock risk, but I can't recommend because I don't believe in the space at all I think it is fighting a huge headwind. Maybe a few preferreds issued by them would be better. Slightly lower dividends but much less volatility and downside risk. Mreits could have zero or negative total return for years.
I'm reluctant to buy into NLY but would prefer to buy an ETF or closed end fund that has many companies like NLY. I'm researching and would appreciate anyone's recommendations. thanks
Oh and FWIW, i quit investing dividend cash... I'm sick of that heading south too... I invest that in other stocks "Making Money" Sooo, i'm gradually liquidating my NLY stock position! I'm selling "higher" before it heads lower!
The upside prevails as long as 9.52 is support.
Alternative scenario: below 9.52, expect 9.26 and 9.11. IMO it could go either way.
When I buy dividend paying stocks, I sell them before the xdate when the price per share is at a peak. I can buy them back in mid cycle, watching for a low that matches (more or less) the previous cycle low. I listen to the quarterly conference calls for clues. I think I can make some money with NLY. Time for me to sell it today. I'll keep an eye open, and I know it will drop by the dividend amount overnight on the xdate. Why don't you sell what you have before the close today, and then (e.g. 2/1/2016) buy it back, using the $$ from today's sale to buy additional shares as well. It is a start, but won't change the loss from giving it a the blind eye year over year. Poco un poco you can add to the shares you have (pr split the money between NLY and CYS).