The pps movement likely has more to do with people searching for yields, as well as a better outlook for the housing market. While RSO's AFFO has been a few cents above the dividend, I'm not too sure that they could safely increae the dividend right now. You want to leave yourself some room there -- i.e. you want AFFO to always be a little higher than the dividend.
The preferred is probably their cheapest cost-of-capital right now, and I'd like to see them using their ATM program in that area. In addition, I don't want to see tons of cash sitting on the side lines. RSO needs to get more competative and be able to issue common at better prices -- i.e. investments should yield at least 4-5% higher than the cost of any capital raises.
In addition, they have been involved in some joint ventures with real estate that isn't earning interest. Eventually, the hope here is to sell these for capital gains and move the money into interest-bearing assets. I don't know if RSO is ready to pull the trigger on this yet.
Sold a good portion of my RSO today in 6.50's. Traditionally she tops out at 12-13% yield and the next dividend is a few months off so am not expecting an announcement for a bit.
Am optimistic RSO will do well this year but the cap gains at this level are too big to ignore and so kept a small portion. I'll come shopping for more RSO shares at a better price as this has been a great investment.
Well, I hope for good news, it's now my second largest holding as of the end of today (VNR is now the largest). But they continue to bleed through the stinking stock purchase plan, and the track record of past stock increases has been entirely dilutive, they've never used the additional capital accretively. Of course, we've been over this many times, so I won't beat it to death, but so long as they keep increasing the share count, it makes it difficult to see p/s growth.
Neither, management has made it clear it's not in the business of enriching legacy stockholders who bought for a buck or two during the crisis.
The question is whether at $6.40 the stock is getting ahead of itself. If they reported cash flow in the low 20 cent range rather than closer to 25 cents or higher, I think we could see a 50 cent reaction in share price. I don't see the run-up from $5.80 this year as having any particular justification. Should this really be priced to yield in the same range as NLY? It's always traded at a higher yield in the past.
RSO is my biggest holding, but I can't ignore that it's now within range of some of the over-looked MLP's with much greater appreciation potential, like QRE, which yields 11 1/2% right now. I'm not making a big move, but I did reduce my exposure here a bit and swapped out.