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  • cyberwhorm32 cyberwhorm32 Dec 23, 2004 1:22 AM Flag

    NFI dividend.... $2.65 for Q4!!!

    This is not bad news if you understand MREITs. The bad news that Justsliding is referring to is the fact that NFI guided down on GAAP earnings. GAAP earnings are irreleavent for MREITs like NFI and NLY because they must pay dividends based on taxable income. GAAP rules require that impairments on the portfolio are recognized... however GAAP rules do not allow for gains from offsetting hedges to be recognized. This is the case with NFI. The GAAP earnings will be in the range of $4.20 for 2004.... however, Taxable Income per share will be in the range of $9.50. And, REITS must pay dividends at the rate of 90% of the taxable income by the time they file their annual tax return. GAAP plays no role in the computation of the dividend. NFI guided down for GAAP, because of the compression of the yield curve. However, this was fully hedged in the money markets and that is why TI will not go down. Read the NFI announcement carefully and you'll unerstand.

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    • Cyberworm32 concluded on NFI

      "However, this was fully hedged in the money markets and that is why TI will not go down. Read the NFI announcement carefully and you'll unerstand."

      Markets don't care about fundumentals in the short term ... only momentum and this announcement cut the momentum out of NFI and the rest of the reits ... . and NFI down $5.00 in the morning now.

    • so, cyberwhorm32, explain to me how GAAP and TI are related?

      You have to pay the piper at some point.

      I am not long or short NFI - it had a nice run and it was cheap. I think it stays in a trading range for a while.

      If originations don't grow don't expect a nice dividend in 2006.

      Re: NFI dividend.... $2.65 for Q4!!!
      by: cyberwhorm32 12/23/04 01:22 am
      Msg: 22512 of 22518

      This is not bad news if you understand MREITs. The bad news that Justsliding is referring to is the fact that NFI guided down on GAAP earnings. GAAP earnings are irreleavent for MREITs like NFI and NLY because they must pay dividends based on taxable income. GAAP rules require that impairments on the portfolio are recognized... however GAAP rules do not allow for gains from offsetting hedges to be recognized. This is the case with NFI. The GAAP earnings will be in the range of $4.20 for 2004.... however, Taxable Income per share will be in the range of $9.50. And, REITS must pay dividends at the rate of 90% of the taxable income by the time they file their annual tax return. GAAP plays no role in the computation of the dividend. NFI guided down for GAAP, because of the compression of the yield curve. However, this was fully hedged in the money markets and that is why TI will not go down. Read the NFI announcement carefully and you'll unerstand.

      • 1 Reply to batraa
      • Hi batraa-

        I'm not cyberworm, but as a CPA who knows the difference between GAAP and taxable income I can assure you that GAAP is a far more accurate picture of financial condition than is taxable income. Most (but not all) changes required by GAAP evenually get to the tax return. No way around it. The main exception with REITs being derivatives and swaps that are marked to market for purposes of GAAP but not for tax purposes. Of course, if those same derivatives and swaps were unwound, the identical results would be reflected on the tax return. Personally, the risk entailed by derivatives and swaps bothers me more than NLY's unhedged leverage.

 
NLY
10.89+0.13(+1.21%)Jun 24 4:01 PMEDT