RSO reports only $10million cash (about equal to it's promised qtrly dividend), promises dividends will continue in '09, stock goes up 33% today..
Whereas, NRF reports $280million cash, promises no dividends likely in '09, it's stock price down again today.
NRF must see something pretty scary ahead..
Which of these would you buy, or neither?
I could be wrong of course, but one can profit either way by holding good securities that have already been beaten into the dust, like RSO and NRF for example. There are some "conventional" stocks that may also seen their nadir, AA for example.
In another crash day no doubt they would drop, but we've probably seen the floor already. Any retrenchment down there would be a glorious buying opportunity for trading, like the last ten days. As Warren Buffet noted, only those wishing to sell are interested in high stock prices, and I wouldn't sell NRF-A/B until the company pries them out of my reluctant hands some sunny day.
Keeping invested and maintaining cash in roughly equal measure will allow one to take advantage if the bottom is in, and to strike if we plumb the depths. To get a large cash yield from preferred securities (with substantial upside) while you wait . . . it's really been a remarkable time to enter the market.
I've traded and owned some REITs, both mortgage and equity, since 1998 and feel that NRF and RSO are among the best MREITs. Both could reduce their dividends on the common somewhat within the next couple of quarters, but both should also make it through this recession/credit crisis and start to show some growth again.
The stock market looks forward 6-9 months in advance. If, as many economists predict, the recession persists through the 1st half of 2009 but the second half begins to show some growth in GDP, we should have seen or be bouncing up and down along the market bottom at this time.
Disclosure: Among other stocks, I own preferreds of a few mortgage REITs and an equity REIT. Common stock has more upside potential, but since I'm primarily an income investor, I prefer (no pun intended) the dividends from the preferred at this time.
I've owned Rso and Nrf on and off for the better part of the last year. For now, I've settled on Nrf Prf and Rso common.
Rso is the only Reit that I know of that has consistently given positive guidance on their dividend, and delivered. From the beginning of 2008, they continually gave guidance of 41 cents per share per quarter, and so far, they have only missed by 2 cents; not bad, considering the kind of year 2008 has been.
Nrf has maintained a policy of not giving dividend guidance but they have always given strong hints, and the latest hint was that they will withhold as much of the dividend as accounting rules allow in order to preserve capital.
Rso is smaller and simpler. They don't own any real property, and a substantial portion of their book is corporate loans. In my mind, this makes them less vulnerable than Nrf to the potential for serious de-valuation of commercial real estate. But Nrf has more potential upside because they have more liquidity and I still am a beleiver in Hamamoto.
I'm not sure that I agree with Zorro on the "time for caution" thing. I know that the economy sucks and will get worse, but major bottoms often occur under such circumstances, and I think that the fall panic bottoms of 2008 will hold.
I re-read the Buffet Forbes magazine interview from 1974 the other day. Its not hard to find with Google's help. Anyway, its worth the read. It was famous for Buffet's call to buy now and get rich, and he was right. The lows of 600 on the Dow in 1974 were never seen again. At one point in the interview, Forbes reminded Buffet of how horrible the world economy was at that point with double digit inflation and unemployment, and he said something like, well, I know that we have alot of problems but if all that you are worried about is hyper inflation and depression, at these stock prices, I can handle those worries, as long as civilization doesn't end. That is a very liberal paraphrase on my part but you get the point.
Well, well, well.
Since NRF is trading for less than 1/2 what it was 2 mos. ago and it still has the $$$ it had then and it's paid it's latest qtrly divvy....it must be down because of worries re. the future reliability of it's profits...ergo...dividend.
Not hard to figure that out. Management sounds concerned and is not promising anything. Smart. Under promise...and over deliver is not a bad policy.
I played a round of golf a few weeks back with a Wall Street financial guy...young guy, I might add...and we talked about a lot of things not the least of which was his concern for his job. Nevertheless, I casually brought up NRF along with the names of a bunch of my holdings (like GE, IBM, PFE, DIS, BAC...and my muni bonds) and I thought it interesting that he was particularly aware of NRF and was quite surprised by their low price in spite of their seemingly secure financial condition. Without appearing obsequious, he was quite positive on NRF and urged patience.
Take it or leave it. I'm going to hold onto NRF.
I think you're correct, you have to conservatively assume 2009 is horrific, and that even for NRF there will be a bad debt or two that will progress far enough to be "recognized" for tax purposes. It wouldn't take much to wipe out taxable income.
In my 2009 budget, I'm assuming dividends through Q2 at about the same rate, and that's it for both companies. By Q3 I'm assuming management will see losses coming that will eliminate the need to make further distributions and will suspend the dividend on the common.
Which is why I hold the NRF A/B's in about a 4/1 ratio over the RSO common (I just trade NRF common). Hope I'm wrong and things don't get that bad, but it's time to play defense.
Lost in the answers to this thread was:
1. my original question; RSO, $10million cash or NRF,$280million cash, which would you buy?
2. and If all that NRF cash exists, why the equivocation in the answer on '09 dividends?
You would think a simple yes would have tumbled out.
Instead, listen for yourself to his mumbo, jumbo answer.
His answer raised suspicions, made me wonder...
Maybe I'm alone on this, okay?
Time will tell. For everyone's sake, I hope my suspicions fail to materialize.
Sorry I'm not more facile, but I read the transcript of NRF's report, 3rd QTR '08..
The site was www.bnet.com.
On page 9 of the transcript, the chairman answers a question on dividends which reads to me as I described to you..."the question is complicated...depends on (lists number of issues, including earnings, tax consequences etc)" ...We will address the issues at the end of each quarter"..
Don't hold me to the minute wording but I got the impression that in spite of upwards of $280million in cash, he is focused on the liquidity issue more than the paying dividends issue going forward.
But that's my take. You read the passage yourself and tell us what you take from the discussion.
Seemed to me he expressed more concern for liquidity than for isuueing dividends anytime soon.
Look it over...But that was my take.