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Chimera Investment Corporation Message Board

  • elvisprty elvisprty Feb 2, 2012 12:38 PM Flag

    Do the math - CIM is worth $5

    Chimera Investment Corporation focuses on mortgage-backed securities. Revenues from these securities provide a divided of $.11 back to investors, which yields 14.43%. This can also be bought below book value; the current price-to-book ratio is .85. We don't see quite as much leverage as we might expect from a REIT yielding 14%: debt-to-equity is 110%. CIM is a subsidiary of Annaly Capital Management.

    A 14% yield with a stock that has sound balance sheet, trading below book value with an experienced management team is a tough find. A good buy for any investor who can be satisfied with a 14% annual return.

    The range of REITs available to investors is wide and varied, all carrying a unique set of risks and opportunities. Individual investors can differentiate the options in order to determine which REITs are best suited for their portfolio. Investors seeking an optimally performing portfolio are likely to find that REITs can provide additional diversification while offering a great balance between risk and reward.

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    • Good until interest rates rise!

    • mREIT share price is directly tird to the div. If there is a perception of risk then the sp will drop - raising the div %. If things are positive and div is growing the sp goes up - div % goes down. But sp will always be driven by div.

      example
      When times were quiet NLY traded such that the sp made the div about 10%. CIM, in less good times, with history of falling divs, has traded such that the div was near 20%. Current sp rise can be seen as market confidence that CIM is within 6 mo of shifting to a steady increase in divs.

      Long term stable markets are best for REITs because the returns look very good compared to other investments. I think we are entering one of those periods. My long position here is an attempt to be in before the rush. Hopefully, I will be able to exit in a few years equally well.

      Cheers

    • Don't know about $5. But $3.50 seems reasonable within current earnings range. If the housing market takes off then yes, see you at $5.

      • 1 Reply to el_torero_palido
      • As it happens I am also in the housing industry in addition to the market. I work in residential construction in the NE FL market, and I can say that the last 3 months of 2011 were unusually busy for what is otherwise a very slow time of year. Does that bode well for 2012? That remains to be seen, but all the associates I have discussed this with have seen small upticks in their business. Again, this is just one market in a very large country, and I can't say this is happening in a majority of markets, but here in Jacksonville, FL, the housing market is definitely showing signs of dragging itself up off the bottom. I put the b/v of CIM at $3.30 so I'm not sure what math you used to come up with $5, but if nothing else it's a nice thought.

 
CIM
14.20+0.04(+0.28%)Apr 29 4:00 PMEDT