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Walter Investment Management Corp. Message Board

abccoll123 2 posts  |  Last Activity: Sep 30, 2014 9:32 PM Member since: Sep 18, 2008
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  • 1) Assuming a marginal tax rate of 25% and long-term capital gains tax rate of 15%, with the S&P 500 after-tax dividend yield being 1.4%, current 10% dividend yield in MReits ( AFTER-TAX yield = 7.5% ) is equal to an annual return of 7.5% on S&P 500. One is high-risk investment, the other lowER-risk investment.

    2) S&P 500 is probably BACK-STOPPED by the Fed, PPT and banks. No such protection for the MReits.

    3) S&P 500 held by LARGE institutions and investors - who can WITHSTAND VOLATILITY much better than the SMALL individual investors who hold MReits ( large individual investors don't hold MReits because of the CRUSHING marginal TAX RATE ).

    4) Will investors flock to MReits if S&P goes down ? If past experience is anything - the answer is NO. So MReits go down when S&P holds steady - and then MReits GO DOWN again when S&P starts going down. NOT a safe haven at all.

    5) MReits are small/medium company stocks. Small cap stocks are underperforming a lot in this market - next underperformer being mid-caps.

    With all this said - is it time to RETHINK an APPROPRIATE YIELD for MReits. In other words - is 10% yield STILL ENOUGH ? Risk has increased in the overall stock market again.

  • Reply to

    will DHF ever go back to $4.50 ??

    by basil_leaf66 Sep 11, 2014 2:41 PM
    abccoll123 abccoll123 Sep 26, 2014 5:38 PM Flag

    Short answer - depends on the dividend. Last two years, they have cut dividend by about 10% each year due to this low interest environment.

    Fed is NOT going to raise rates until at least middle of next year - that too maybe more symbolic than substantial. So DHF will have to buy low yielding bonds ( I don't know if it has any callable bonds ) for one more year at least - meaning ANOTHER DIVIDEND CUT coming NEXT YEAR.

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