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Resource Capital Corp. Message Board

  • petrdeep petrdeep Nov 5, 2010 8:09 PM Flag

    Deciding between NLY CIM RSO

    I want to add one of these for the long term and reinvest the divys, all opinions are welcome.
    Thanks

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    • I have both RSO and CIM and am very happy with both. At times it hard to watch the price fluctuations but I remind myself that until the 60's dividends were how people make money from stocks, not capital gains, so I drown it out. They're doing better than my shares of PGH, ouch there.

    • As has been said, these are three different business models.

      RSO seems to offer the best long term growth.

      CIM will do well as the housing market recovers. They own discount non-agency backed paper that ought to appreciate. Eventually, people will refi and pay off their loans. A double dip could put CIM in a tough spot, but those fears seem to be waning.

      NLY is a pure agency play like AGNC, CMO and ARR. The yield spread is not bad right now, but that won't always be the case. I prefer to trade in and out of these rather than calling them long term holds. AGNC is one pretty well run company, and is my favorite agency reit. Listen to some of their conference calls. They have plans on how to deal with rising rates. For an example of what could happen to the agency RETIS, look at the historical CMO yield curve that is in their investor presentation.

    • Don't even think about NLY for a long term hold, it's got a date with the end of its business model, when the government quits backing agency debt. But, if you're interested in those companies, check out AGNC, last time I looked it was carrying less leverage, and it yields higher at the moment (caveats abound).

    • RSO's business model is using CDO vehicles for income. That model has yet to restart in large quantities.

      NLY is an agency REIT, whose business model is using the spread between government guaranteed agency paper and NLY's short term borrowing rates. When the spread narrows, NLY's income will drop, the spread at some point will narrow.

      You might consider BDC's as well as the above. The dividend yields are lower, but some of them have been using that business model for many years with fairly consistent results.

    • ....A close look at the amount of shares oustanding tells an investor how that company keeps going! Personally I would prefer RSO for stability and business model! I owned NLY a few years ago, watched it drop to $11.00 or less, saw the dividend get whacked etc. RSO kept paying even in the darkness!!!!

    • What does long term mean for you? What I would choose for myself between these would all hinge on what long term means.

    • NLY's dividend was $0.65, then $0.75, no wait=now $0.68. CIM just had a major secondary offering. RSO has a solid $0.25 dividend all cash, has exceeded analyst estimates on earnings and may raise their dividend in 2011. Hmmmmmm. What's an investor to do? Cramer said that TMA would be fine, now they are bankrupt. GLTU.

      • 2 Replies to seeds.bill
      • I own both CIM and RSO and have been in and out of NLY. The business models are completely different. RSO is currently my largest holding.

        Asking the RSO board if RSO is a good investment is like asking an auto salesman if the cars he sells are good. LOL. (Seriously, people here like RSO.) I trust the CEO when he tells us that the 25 cent dividend is "solid." After having collected a few of these dividends, and having watched RSO consistently pay an excellent divident throughout this crisis, I have no reason to doubt that the dividends will continue. You can read through the past 10-Qs yourself and/or read the CC transcripts.

        As a long-term investment, the choice for me is clear. RSO's income will rise when interest rates rise. Convesely, there will be a 2-3 year period where something like NLY will make less money, and potentially very little if rates rise too rapidly. (It takes NLY about 3 years to recycle their portfolio of MBS.)

        With something like NLY, their profits are almost entirely dependent on the spread between short-term borrowing (usually 30 to 90 days, but sometimes upto 180 days) and the yield on the MBS they invest in. NLY invests in 100% agency; its income from mgmt fees is minimal.

        CIM: Here's good Web blog that gives the big picture about CIM's business model. It also goes over a few other mortgage REITs:
        http://mindonmoney.wordpress.com/2010/06/16/chimera-cim/


        Wayne

      • tulsadevlin@sbcglobal.net tulsadevlin Nov 5, 2010 9:43 PM Flag

        I own CIM and RSO. Both good divys.Do your DD.
        Message board for RSO is great. Many smart and helpful posters here.Divy stocks are all the rage now.Be careful.

        GLTU

 
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