"...Chimera may be risky but I do not believe that this risk merits the current 17% yield found on the stock. A look at Chimera's past performance displays that this is a company that knows what it is doing in the current environment. I think if Chimera can continue to display operating results similar to the ones that it has been attaining then we will see a significant upward trend in the shares of this stock. Even in an environment of rising interest rates, Chimera is set to benefit from increased income through its ARM investments. Ultimately, the current yield should more than make up for the risk investors are taking...."
Nice, informative article, and I like the conclusion--quoted above--very much!
Hey Bob -
Buying RSO on the dips is my plan - just didn't happen to be ready for this past one.
Also interesting is that RSO has chosen secured loans to raise capital, as opposed to additional offerings. Could that be because the difference between the book value and the current market price (dip) isn't large enough??
Oh, and as to your question about interest rates. CIM is positioned best of all the other residential mReits that I have seen (CMO, AGNC, NLY), in a rising interest rate environment. It is not so much that CIM likes paying higher interest (it doesn't) as other correlations that go along with higher interest rates such as a real housing recovery and a heated up economy.
Rising interest rates will put the screws to the agency reits. I know they are "hedged," etc., but it puts a big damper on their business plans.
I am not sure RSO is "my preference." For me, the jury is still out as to how long CIM can pay this kind of a dividend. So far so good though. And, I have gotten used to trading CIM. I have traded 1.071 million shares of CIM so far this year due to what I find is the predictability of its price action, and I have not collected any dividends from it. Ultimately I guess I plan on having a core position of CIM that I forget about as well. I could see having equal positions in RSO, CIM, and SFI preferreds.
With CIM, the insider buying is extremely strong.
RSO got kicked in the pants yesterday.
I thought the analysis at seeking alpha was rather good and informative, the poster has some credentials and took care to point out the risks as well as the pluses.
Sure it does not mean to rush out and buy buy BUY just because somebody posted something over at seeking alpha. As always, everyone should do their own DD.
Also, it says:
"The 4.44% yield on $5.205 billion in investments should result in earnings of $231.1 million. These earnings should increase in the near future as the most recent spread was partly depressed due to the management investing proceeds from previous offerings late in the 3Q where their full effect could not be noticed. These depressed earnings produced a return of $0.069 for each current share outstanding for this quarter."
What does that mean? That the late-Q3 investments produced $0.069/sh in Q3? No way. Or is he saying it WILL produce $0.069/sh in THIS quarter? (It says: "this quarter".) Is it possible to know that on November 16?
"The 4.44% yield on $5.205 billion in investments should result in earnings of $231.1 million."
That would be pretty good. Seeing as how we have 1 billion shares floating around in the wild, that is $0.23/sh. (Yes, I am a math whiz.) I'll take that. .90 X $0.23 = 20 or 21 cent divvy.
I was concerned about the shrinking spread. I almost sold some CIM today to diversify and rotate the funds into RSO, but I think today was not the day to do that. CIM waaayyy outperformed the market today. Very bullish.
I think I'd better sell something else to buy some RSO, but everything else was down too much, too, except for some puts, but they aren't ripe yet.