Interest rate increases (which would include mortgage interest rates as well) should be good for the REIT sector. All new mortgages bought with SPO money will bring in increased revenue that will bolster the dividend and should INCREASE stock price, not decrease it. No, there is something else going on here, perhaps hedge and mutual funds adjusting their portfolios for year-end presentation to shareholders, selling REITS.
Sorry you had such a bad experience with E-Trade; but the rule of buy one day before XD and you get the dividend is correct ---- at least at most reputable brokerage firms, like Merrill Lynch and Fidelity (both of whom have credited dividends to my accounts with them according to the rule). Remember, the dividend is not PAID on XD date; it usually is paid 3-6 weeks after that date to allow the clearing house to update it's records and for the company's registrar to gets its records in order. If you bought the stock the day before XD date, you will be on record with the company as a shareholder of record for that dividend. You have a valid case against E-Trade with the SEC, if you wish to pursue it.
With a gross ROI of 13.5% and little risk to principal with a stable stock price; and allowing say 6% for inflation, you're still netting 7.5% before taxes on your money. That sure beats savings accounts (0.0001%), bonds (3.5% but with principal at risk), and CD's (2.5%, not the music kind). There isn't another investment that does much better for income.
Let's look at a worst case scenario: Interest rates remain as they are for many, many years (maybe forever, but forever is a long time for no change --- the world ALWAYS changes). In this case, there is little opportunity for mortgage REITS to improve profitability; thus, there is little chance of increasing the dividend AND be fiscally responsible (note that a few REITS have sustained their dividend by borrowing $$, but that's NOT fiscally responsible over the long term).
The only sound way to increase the dividend is to grow income from increasing mortgage interest rates (that means issuing SPO's to gain money to buy new mortgages at the higher rates).
It's over $8 today, in just 3 trading days --- that's excellent. It almost makes their SPOs like day trading.
Most shareholders of NYMT are in it for the dividends, not CapGains. So forget about the $3200 paper loss today because it will evaporate in week to come, but the dividend(s) will still be there.
That has been the trading pattern in mortgage REITS, rising to pre-SPO levels within weeks after an SPO. It's also why you need to hold back some cash for future SPOs when they drop. Either that or look the other way when an SPO happens.
I was a holder of AGNC for years until recently, when the share price stopped its trading pattern. AGNC is no longer a desirable REIT. That's why I switched to NYMT.
Of course they have credit facilities for short-term borrowing --- I have credit facilities for short-term borrowing, too --- and NYMT has used them in the past. BUT if you read their statement CAREFULLY, you will see that they have said that they plan to use the funds from the SPO not only to purchase new mortgage paper, but also to fund its operations. They said that because they know that it's ALWAYS cheaper to use SPO money for operations rather than pay interest to creditors AT ANY INTEREST RATE.
So, while they have used short-term borrowing to bankroll operations in the past, going forward they do NOT plan to continue that practice unless absolutely necessary. THAT's what I know; do you?
I never expected a special dividend because the timing was right for an SPO (i.e., rising mortgage interest rates, share price well above book value, and desire to growth the REIT business thru acquiring new mortgage loans, necessitating large amounts of cash). Now that the SPO has happened, the odds of a special dividend are nil. The greater probability is that they will increase the dividend in 4Q 2015 or 1Q 2016, based on greater interest income from the higher-rate new mortgages.
As my dear departed father used to say, "It all depends upon."
They AREN'T borrowing at the short-term rates; they are issuing secondary stock offerings (SPO's) to raise cash for operations and to buy new home mortgages at the rising long-term interest rates. Short-term rates don't enter into the equation for mortgage REITS like NYMT.
Not true; rising rates (regardless of the yield curve) is positive for all mortgage REITS because they will derive cash from SPO's rather than borrowing at short-term rates. Witness the SPO announced after close yesterday.
You're right, I don't doubt that the majority of shareowners (including me) are in for the dividend rather than CapGains. As I see it, rising interest rates from the FED later in 2015 or 2016 will bring higher interest income for the REITS that invest in home mortgages, when the REITS buy new mortgages (as maturing ones come due). That could bring one of two consequences: (a) an increase in the dividend; OR (b) a restart of SPO's (to rasie money to buy those higher-rate mortgages). The key to whether (a) or (b) is the share price rising well above the book value (currently $7.01). If share price stays above $8, then NYMT can afford to offer more shares at a discount to attract buyers and still increase book value above $7.
My guess is that the company will choose (b) to derive higher income. Later (say in 2016), they may be able to support a higher dividend AND additional SPO's --- that's how they grow their business.
For the past several weeks (and perhaps months), it is apparent to me that day traders have been influencing this stock. Heavy volume in the first 30 minutes and heavy volume in the last 15-30 minutes are one sign of day trading. Another sign is price movement during those time periods, with the stock price moving in opposite directions between the two periods --- i.e., buying at the beginning of the trade day and selling at the end OR selling at the beginning and buying at the end to close a short position.
Day trading can affect the short-term direction of a stock and likely will continue to do so until the day traders move on to more prosperous grounds. Day traders create no value in a company's stock; they just are there, wreaking havoc with the market in a foolish quest for profit.
Keep this in mind when trying to decide whether to buy or sell, based on current market conditions of this stock.
As interest rates rise, so will KMM's income from newly acquired bonds. Falling bond prices won't affect KMM since they aren't a bond, but a stock --- and stock prices usually rise as bond prices fall and income rises. Investors don't watch portfolio value of this stock as much as they watch the stock price and income from bond interest (which will rise in future years).
As portfolio bonds mature (at lower interest rates), that cash will be re-invested in acquiring higher-yield bonds, Interest income from the new bonds rises to improve cash flow and net income. After a few quarters of that cycle, KMM will begin to raise it's dividend again, as it has in the past. Just follow its historical cycle.
I've tracked KMM for more than 10 years with my patented analysis system. KMM is now a good BUY for those interested in bonds/bond funds. While it will be a few years in coming, as interest rates rise, so will the income produced by bond holders (such as KMM, as the replace lower interest corporate bonds with higher yielding ones). That fact will likely cause KMM to increase its dividend (now yielding 7.6%), which in turn will lead to higher stock price for KMM.
So, buying now will likely produce a CapGain and higher yield down stream (probably 18 months - 2 years).
Yep, it's a penny stock now. Funny, pennies aren't what they used to be; it's getting so that even banks won't take them anymore (unless you have a very big account at the bank).