In the ongoing speculation about what the dividend & per share price will be, it seems to be overlooked that CIM has roughly 75% NON Agency investment, which is not as affected as full agency investment by a flattening yield curve. NLY, AGNC and those guys are being more affected by the yield curve, and when (not if) interest rates start to go up, their earnings will suffer, and CIM, who holds a much larger percentage of adjustable rate paper, will benefit from higher interest rates after a few quarters of mortgage resets.
I am as anxious as anyone to see the earnings report because even though I have sold about 9000 shares recently, I am still holding around 80,000 or so. If the earnings suprise to the upside, my portfolio gets a boost. If earning stay flat, well, I'm still making about 15% in dividends. If earnings fall slightly, then I'll use the opportunity to lower my cost basis further and wait for the recovery in share price however many months or years later it comes. In any scenario for this earning report, it is a win/win/win for me. I have been investing with NLY for many years now, and I trust these guys a lot. You do however, need to pay attention to your cost basis, and always have some cash on hand to buy on big down days that have no explanation.
I think it's very important, especially for the younger investors on this board, to realize CIM is NOT by a long shot my only holding. A hold a large basket of high paying dividend stocks. I would not advise anyone to take such a huge risk on CIM that it comprises any more than 10-15% of their total portfolio. While I have a penchant for higher risk than most, it bears mentioning that, worst case scenario, if CIM went bankrupt and the stock went to $0 (I am not implying there is even a remote chance of this), I would still be just fine financially. I know in my younger days I tried to emulate others who were very successful in the market, and by doing so I took much greater risks than I should have at times, and it cost me. You can garner insight from others on these message boards, and learn a lot about investing, but by no means should it be your outlet to research a stock. Too many games are played and too much emotion is often involved.
In the latest quarter 82.75% of their holdings were rated B or below. Essentially junk.
Also as of the last quarter 55% of their securitized loans are adjustable rate. These typically adjust on a 3, 5, or 7 year basis. 82% (Total, adjustable and fixed)originated in 2007 and 2008. The periodic adjustment cap is 2% which CIM will need given it's shrinking spreads (seen on page 40 of the most recent 10q).
"At September 30, 2011,98% of the non- Agency RMBS were Alt-A collateral. At December 31, 2010, 99% of the non-Agency RMBS were Alt-A collateral. The non-Agency securities contained in this portion of the portfolio have the following collateral characteristics at September 30, 2011 and December 31, 2010."
Bottom of page 15 from the latest 10-Q.
How did you determine and what is your source (cite the page) for determining 75% non-agency debt?
Since we commenced operations in November 2007, we have focused our investment activities on acquiring non-Agency RMBS and on purchasing residential mortgage loans that have been originated by select high-quality originators, including the retail lending operations of leading commercial banks. Our investment portfolio is weighted toward non-Agency RMBS. At September 30, 2011 approximately 71.6% of our investment portfolio's principal value was non-Agency RMBS, 25.5% of our investment portfolio's principal value was Agency RMBS, and 2.9% of our investment portfolio's principal value was secured residential mortgage loans. At December 31, 2010, approximately 83.4% of our investment portfolio's principal value was non-Agency RMBS, 12.6% of our investment portfolio's principal value was Agency RMBS, and 4.0% of our investment portfolio's principal value was secured residential mortgage loans. We expect that over the near term our investment portfolio will continue to be weighted toward RMBS, subject to maintaining our REIT qualification and our 1940 Act exemption.