If you like it here, you will love it after the ex-date when the price falls by the divy amount and continues falling until it becomes oversold. Why is it a bargain if it always declines after the ex-date and you end up with a loss for a total return?
Sorry for the new post on ALDW. Interesting discussion on ALDW on investor village board. Liza Huang mentioned that there's risk that they could have zero distributions for at least another and maybe 2 quarters. If that happened, she thinks the stock would drop to $4.
Yes, you do, but be careful. If you go back and look, on the ex-date, the share price will drop by at least the amount of the distribution. The pattern has been that the stock drops further after that. It is a sucker's play.
Jay, don't be taken back by Skittle's comments (I think they were meant for me). Whenever someone pokes a hole in his nonsensical theories (on a different post he was arguing that paying the preferred was going to cause a loss and the common to decline, then he praises Dugan for talking about exploring investments in Europe -- we should start calling him Skitso), he goes off. You are exactly right in your thesis. The company will still have to execute
Skittle, is this you trying to play investment banker again instead of just being a dairy farmer? The preferred isn't convertible. Yes, an 8.125% rate is high. They bought some back when it traded under par, but now that they are coming current they would have to pay par. The only reason to buy it back is if they don't have other assets to buy at a higher return. You really get confused by simple accounting. In one post you complain that bringing the preferred current is going to cause $40 million to be "lost" and thus cause the common to decline, but now you are advocating that they buy the preferred in order to "release" 175 million in equity. Huh? If they buy the preferred, they either have to spend cash or borrow or issue common. How does that "release" equity? Since you claim to be the expert, why don't you walk us through this plan or can't you do the math?
The way you do this is the same for how the other REITs who also suspended pref divies did it: they sold assets, then bought back some preferred under par, then they got credit lines, bought attractive assets, brought the preferreds current, issued more equity, resumed a common dividend and eventually redeemed the preferred and/or replaced it with lower cost preferred after they showed the market that they could continue to pay divies. Several REITs have followed this same path but you know better because you once knew someone from NYC who worked in finance. What a blowhard. And you say that I'm the know-it-all.
10 year rate now up on the jobs number. Resumption of taper talk makes this tough to rally.
Haven't been following those, but there's been a Seeking Alpha article on WHX which I think is the one that terminates soon. The yield means nothing as it comes out of principal. Not sure I would characterize these as "top performers" unless their total return exceeded that on the other royalty trusts.
Skittle, before you comment about what the market will think, why don't we look at comparable companies who also withheld their preferred divs and the reaction after they trued them up. I have mentioned 2 (FR and NCT) and also worked for another publicly traded company that was in the same situation. You talk about perception but there's also the perception that if they are able to come current than things must be getting better and that overhanging issue goes away. It is a little bit of a rubics cube problem in that getting current with the preferred means they can now issue a common dividend which means that growth and income mutual funds can then buy the stock which means that their equity issuances should have better demand. There was a cost to this with the PIPE issuance, but they couldn't do through growth alone and a convertible or other preferred whould have been a hard sell since they weren't current.
If you think you know how the market reacts, why don't you provide examples of companies that paid their preferreds and had their stocks decline. Right now, you are all hot air.
I have given you 3 examples and you have nada. In another section, MHR, an oil and gas company, had to suspend payment on their preferreds because of a delay in filing their SEC reports and when they came current, the common stock rose.
Maybe under $10 if I am lucky. Some yield chasers will buy up to the ex-date, believing that this is a real 20% yielder, only to get their doors blown in after the ex-date.
It's a guess. Most know that divies are calculated off of Taxable earnings and the numbers in the earnings reports are GAAP which is different. But as for looking forward or back, I am starting with the numbers at the beginning of the 4th quarter (the Sept 30 numbers in the ER). I don't believe that BV increases get factored into the earnings upon which the divy is based. Now the increase in BV during a quarter could allow them to reduce leverage, but I doubt that they lever up the increase in BV to earn additional income because that would put them at risk of a margin call if things went the other way. While commercial earns a higher spread, they can't use as much leverage (usually less than 4 times). BTW, the 10 year is at 2.60 as I write this and was 2.62 on 9/30, but that doesn't take into consideration spread between Treasuries and MBS which also fluctuates.
Ray, you are right that the numbers are different for each asset component but those were the weighted averages at the beginning of the quarter. They could always have made changes during the quarter.
Bottomline, it is a guess on my part, but the market reaction seems to imply that they think a cut is coming.
My rough calculation is 2.28% spread x 9 times leverage x 16.81 book = $3.45/4 = 0.86 - 14 cents for expenses = 72 They are cutting. Maybe not to 72, but to 80 or 85 and that's why I think this is down. Also, preliminary GDP came in at 2.8 which was above estimates. Probably gets revised downward, and Goldman just lowered first quarter estimate under 2, but this was enough to restart taper talk. mREITS don't revive until the 10 year starts dropping again. Will probably take a drop below 2.4%
skittle, go back to milking the cows or making cheese. Paying the preferred the accrued does not result in a loss of that amount. Look at the balance sheet (do you know what that is or do you have to call your friends in NYC to tell you?). I assume what you mean is that their cash will drop by $40mm and that is true and was one of the reasons for the recent equity raise.
As for the delay in truing up the preferred, that has been discussed before by others on this board. As you know from your investing experience, the market can be inefficient in the short term and some things that are "expected" do not immediately get priced into the stock. That's what makes a market as some view the expectations as more certain and some expect disappointments. It's why some stocks drop after beating earnings. I have no sentiment attached to this particular stock, but viewed it as an opportunity once these issues got resolved (as they did with FR and NCT). Paying the preferred clears the way to pay the common which they announced they would do in the first quarter, but some may still need to see the common dividend declared and the amount.
So it looks like it is going to take longer for the market to notice GPT.
"I don't know if I would want to hold any shares when nearly $40 million disappears."
I'm not an accountant, but the $40 million that represents the unpaid and accrued preferred dividends is already meant for the preferred. The book value calculation for the common already takes into account that the preferred is entitled to this amount. Correct me if I am wrong, but they have already expensed it. So their books should show cash plus $40million and a due to payable to accrued preferred. When it gets paid, the cash balance goes down but the receivable is eliminated and the book value of the common is unchanged. There could be some charges for bringing the preferred current depending on how they are carrying it.
But the main point is that the common never was entitled to this $40m, so when it "disappears" there should be no adverse reaction.
helmut, you have been good (if early) before on MPW. HPT just announced a secondary so we shall see how that goes. Could present a good entry point after the decline. Stock looks to be turning down (prior to the secondary) so it could blow through some stops and cause some technical selling. Will read the cc to see.
yep. Added some more today since the stock was up. I could be wrong, but why should NTI react any different than ALDW and CVRR? There was some positive commentary on VLO but that is a different company. Part of my rationale is also that I believe the high frequency traders and algorithm driven programs pick up on negative headlines (i.e. anything that says "misses" or "'declines") and enter sell programs. There was a story in the news about these programs that hunt for stop loss orders.
Ok , this is about the 4th time today that I've had to sign in to Yahoo in order to post.. Now, keep this in the back of your mind. The Treasury will start issuing floating rate notes on Jan 29, 2014. It shouldn't be long thereafter that the primary dealers start to force interest rates up. We will see.
First of all, what "courage" does it take to pick a stock on a Yahoo message board? You clearly don't know what the word means and are insulting to all those readers who have demonstrated real courage in life. You are the one bragging about how much you know, how great your picks are and how much money you supposedly made. That is the definition of a blowhard. You don't even use your real name, so how much courage does it take to hide behind some name of a candy?
The source of our disagreement is that you said that investors were leaving GPT and that its future return would be limited. I disagreed based on an expectation that the stock would move up upon announcing payment of the accrued prefs and reestablishment of a future common dividend. This is based on what happened with two other REITs (NCT and FR). You then proposed some argument to support your position by saying that GPT was not a growth stock, but some stodgy income stock or that short-term investors had left the stock for long-term investors or whatever you meant. Fine. You don't own the stock and proposed that people buy CLF and CEP instead and are now whining that everyone didn't follow you. Maybe it has something to do with the fact that you are an immature jerk and post attacks like a 5 year old bully.
In case you forgot, this is the GPT message board. Thanks for sharing your investment ideas, now go take a nap like a 5 year old should.
Keebon, I have bought Dec puts on NTI expecting them to have the same market reaction that CVRR did. Once they reach their ex-date, the amount of the distribution will come out of the stock price too, and there's also the possibility of another spo. I could be wrong, but the stock looks like it ran out of gas (pun intended) right at resistance.