All of the residential mortgage REIT's report CPR's in their quarterly reports. What does a CPR of 8.0% mean? Is this an annual rate or is the annual rate arrived at by multiplying by 4 to give an annual rate of 32%. If the annual rate is 32% that would mean the bulk of the loan portfolio would be repaid off over a 4 to five year period.
NYMT just sold a security borrowing $56 million using 3 loans totaling $93 million in principal balance. Interest rate 525 basis points over one month Libor for a rate of approx. 5.45%. Are the underlying loans earning a higher rate or lower rate than the cost of funds? Is this accretive to earnings or not?
An add to prior. Book value after accounting for the $72,000,000 of Preferred A outstanding is $122 million less 72 million = 50 million divided by 11 million shares of approx $4.54 per share. Yahoo Key statistics does not take this into account. This does make the recent share sale accretive to book value.
The Preferred A stock (which will be sold periodically) has a coupon of 6.00% - However underwriting fees and costs are high at 12.5% leaving only 88.5% available for acuisitions. The effective tax rate (.06/.885) is 6.78%. This is a higher cost than the cap rate (earnings) of apartment buildings which are generally below 6.0% Paying more for your financing than the underlying proceeds of your assets is a losing business model. One possibility is that these preferreds are a replacement for mezzanine financing which carries a higher rate of 9% to 12%. If adding the current total liabilities in Q3-13 of 158 million and the $72 million outstanding of Preferred A you are at leverage of 82.4%. At this level of leverage you should be getting outsize dividends say 7.5% plus. This is a company intent on growing. Don't buy it if you can't stomach periodic share sales. Any thoughts are welcome.
DK has a 2.8% or so dividend yield. This is about 1/4 or less of the admittedly highly variable yields of CVRR, NTI, and ALDW. The corporate structure and payout ratio don't promise much more. Why the love?