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Resource Capital Corp. Message Board

  • exdivy exdivy Sep 9, 2010 10:04 AM Flag

    How much do you want to earn?

    Just like to look at the dividend rate associated with buys at various prices:

    $5.00 = 20%
    $5.25 = 19%
    $5.50 = 18%
    $5.75 = 17%
    $6.00 = 17%
    $6.25 = 16%
    $6.50 = 15%
    $6.75 = 15%
    $7.00 = 14%
    $7.25 = 14%
    $7.50 = 13%

    And, of course, price appreciation?

    If we just look at the most recent high of $7.55, this is the percent of Price Appreciation one would gain by buying at different levels:

    $5.00 = 51%
    $5.25 = 44%
    $5.50 = 37%
    $5.75 = 31%
    $6.00 = 26%
    $6.25 = 21%
    $6.50 = 16%
    $6.75 = 12%
    $7.00 = 08%
    $7.25 = 04%
    $7.50 = 01%

    So, a buy at say $6.75 (give or take a few cents) would equal 12% price appreciation with a 15% dividend rate.

    Where can one invest their money in this market for this type of return with this type of security: RSO has NEVER failed to pay a "meaninful" cash dividend?

    GLTA

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    • Just like to look at the dividend rate associated with buys at various prices:

      $5.00 = 20%
      $5.25 = 19%
      $5.50 = 18%
      $5.75 = 17%
      $6.00 = 17%
      $6.25 = 16%
      $6.50 = 15%
      $6.75 = 15%
      $7.00 = 14%
      $7.25 = 14%
      $7.50 = 13%

      And, of course, price appreciation?

      If we just look at the most recent high of $7.55, this is the percent of Price Appreciation one would gain by buying at different levels:

      $5.00 = 51%
      $5.25 = 44%
      $5.50 = 37%
      $5.75 = 31%
      $6.00 = 26%
      $6.25 = 21%
      $6.50 = 16%
      $6.75 = 12%
      $7.00 = 08%
      $7.25 = 04%
      $7.50 = 01%

      So, a buy at say $6.75 (give or take a few cents) would equal 12% price appreciation with a 15% dividend rate, when the stock hit it previous high.

      When the price hits $10 (give or take), a buy at $6.75 equals 50% in price appreciation.

      Add to that the prospect of the dividend increasing and be happy you were long.

      Where can one invest their money in this market for this type of return with this type of security: RSO has NEVER failed to pay a "meaninful" cash dividend?

    • which quarter did they grow the dividend?

    • Magdala

      I too was astonished at the amount of money the DRIP program brings in. I suspect that it will continue to be a significant source of capital going forward and that it will, as you suggest, increase.
      GLTU

    • I'm still marvelling at the amount of new investment money they bring in via the DRIP and that is only a fraction of the shares receiving dividends. I bet if they advertised the DRIP more to shareholders, they could increase that even more. That's like having a quarterly secondary without having to pay the vulture underwriters by discounting the pps.

    • Magdala;
      My understanding is the same as yours concerning the 90% distribution of taxable income. However, loan repayments would not be considered as income and therefore could be reinvested. Also, borrowing money would not be counted as taxable income. Another source of cash for investment in property REITS is amortization and depreciation, both being non-cash expenses reducing taxable income but not using cash to do so. Financial REITs have various accounting methods that have the same effect of reducing taxable income but not reducing cash (such as a loss carry-forward). (Ag, Exdivy, and others much more familiar with accounting could enlighten both of us as to what some of these methods are.) The cash from all these sources could therefore be used for new investment in addition to the 10% remaining after paying out 90% of taxable income.
      Therefore, there is the ability to have cash for investments which is significantly greater than the 10% taxable income residual without having to issues new shares. That is why I believe RSO and other financial REITs can grow without selling more shares.
      Thanks for your question and I wish I was better informed as to how all the accounting works so that this answer could be more complete but the essence of it I believe is accurate.
      GLTU

    • Mag-

      Some bond are floating-rate bonds that flunctuate.

    • j_owley,

      You do know that we had a financial crisis that led many REITs to stop paying a dividend, some to pay it in stock, and others to reduce it to far less than "meaningful" levels?

      Meanwhile, RSO conintued to pay a "meaningful" cash dividend, told you the dividend would be maintained at $0.25 for a year, and said they are going to "grow the dividend" going forward.

      I think your expectations should be based on how well RSO did during the crisis and their "money in the bank" guidance.

      Whining about implausible, worst case scenarios is not only foolish but counter productive on a stock message board.

      That is not to say one should not be cautious, but statements like "if the dividend dropped to a penny from its all time high, that would be a 97.5% reduction" are correct mathematically but meaningless in a practical sense.

      It is just as foolish as someone saying,

      If they raise the dividend to $0.50, that would be a 100% increase from current levels.

      Once again, mathematically correct, but so implausible as to make it meaningless for investors on this board.

    • Another way to look at this. I purchased @ $5.32 for 18.8% divy even if they lower it to .20 for the next 4 quarters ( I think unlikely ) I will still get 15% as you say where else can you get that kind of interest.

 
RSO
5.17+0.05(+0.98%)Oct 23 4:05 PMEDT

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