It pays a dividend of 10%, the rest is return of capital and shouldn't be considered as contributing to the dividend. The restated financial reports are being held up by matters that are beyond the control of CIM. Realistically, we may not see the restatements until June. Once the restatements appear there will be several lawsuits, including claims from those who purchased the Re-REMICs. On top of the rest is the fact that profitable activities in the non-Agency space have probably been halted.
This particular rock is not very solid. The turning point for CIM was failure to release the restatements by 1/15. That one fact indicates that matters are much worse than I had previously thought.
The 3% that are not ''income'' are a question of acctg approach - no? Certain assets which have increased in value, but will not constitute income until they are sold may be considered to represent the additional 3%. Isn't this related to the entire reporting issue.
I do not expect that CIM will be de-listed from the NYSE on 2/15, or ever for that matter.
I think the extension until 2/15 just puts CIM on a shorter leach, putting pressure on them to get the matter resolved in much the same way as did the reduction in the management fee. My concern is that lack of a resolution reduces investment activity, reduces profits, and may affect the company for longer than I would like.
I long ago dismissed the notion that it takes this long to prepare the required documents, or that the delay is due to an inability to value the portfolio. The GAAP and economic book values are fairly current, and by the end of January, CIM will by law have to reveal the portion of the dividend that is return of capital. With that number we can all easily calculate taxable income for 2012. With both book and taxable income, I could sketch out a fairly up-to-date balance sheet.
The problem is that CIM has probably curtailed their investment activities. With the revelation that through the third quarter, about 20% of the distributed dividend was return of capital, the $0.09 dividend becomes a $0.072 dividend. Based on a closing price of $2.93 per share, that amounts to an annual return of 9.8%. Considered against other hybrid mREITs that don't have the baggage that CIM has, it's a pretty poor performance.
I still think that NLY is likely to eventually purchase the company, but who knows when. After the restatements are released, the lawsuits will be filed, and that may constitute additional reasons to delay a purchase. On balance, CIM's inability to get out from under this problem suggests a very messy situation within the company. At the current price it will eventually pay a good return, but it may take considerable time for that to happen.
A discouraging appraisal. On the other hand, how do you square that with what appears to be an endorsement of CIM by Leon Cooperman in his recent CNBC interview (granted, it was before the latest restatement press release) and the fact that there hasn't been any insider selling in at least the last six months (these guys hold or buy for only one reason, no?). Plus, if the housing market is firming/rising, doesn't that improve the value of the underlying securities CIM is holding.