Investors seem to be freaked out by mgt's commentary around current returns (on a year-end BV of $13.31) that mgt is approximating to be 10% on a net basis. Mgt admitted, however, that this appears to be a bit on the conservative side as current spreads on new investments are probably closer to a 11+% ROE (120 bps hedged spread), and the 10% ROE assumption embeds the expectation that a rally in agency MBS from aggressive Fed purchases will drive returns lower (to 100-110 bps perhaps) sometime later in the year.
CYS is now trading at around 90% of my marked-to-market BV estimate of around $13. The dividend is likely to be cut to 35 cents per quarter but this is still a healthy 11.9% return at the current stock price. Moreover, the stock will go likely go ex-dividend in only 3-4 weeks, so you are really buying this at $11.40, which is less than 88% of my current marked-to-market estimate of BV.
Management owns a lot of stock and had been buying at meaningfully higher prices. There is also a big buyback authorization in place. These guys should be putting it to work in my opinion given that the stock now trades at a very healthy discount to BV, and is hence a better value than returns on new agency MBS investments. A buyback would boost BV, ROE, and EPS/dividend per share metrics as well.