Except for a bright spot during the meltdown RSO has been a continual disappointment. I want to think he can do it and jump back in but I am very hesitant. Just don't know.
Unless things go absolutely to hell in a hand basket in China and with oil I agree, .25 by year end. The increases are going to be aller and slower than anticipated. Might even see smaller than quarter point increments.
Your post is a bit self centered, it's not polite to gloat and no one likes a art #$%$. But you did nail it and I would have never thought it could go this low. There is obviously no love nor trust for this company. The question I have now is if the company is as good of a solid income play as it appears to be or is it a permanent dog? What is your hale opinion? TIA.
I started to follow Ffc years ago. At the time the dividend yield was about 7.5% and the 10 year treasury just under 5%. So why is it that now the 10 year is less than 2.5% and Ffc yields over 8%? The fed 5 year forecast has the 10 year going up to about 4.5 in 5 years. With this in mind closed end preferred funds may just perform at or near their yield. I like Ffc but not at the small discount to NAV. Hpi is at about a 10% discount and has performed well. In a market like this it's difficult to be totally committed to anything.
I'll have to check the energy exposure of PNNT. I think it's around 8%. I went back and listened to their last CC. Art Penn seemed convincing. Baird put a buy rating on them in Feb. and Jefferies just did the same with MCC. If these 2 get back to NAV there is a 33% upside with a current 14%plus yield. RSO has a deeper discount, higher yield and no energy exposure that I am aware of. The issue with RSO is it is not earning it's dividend with recurring affo. It is moving in the right direction but needs time to grow ordinations and portfolio to creat more spread income. Hopefully there are still enough rabbits in the hat to buy them the time they need. Worse case now is a .48 to .52 div next year with a 4.80 NAV. At these prices a .52 dividend would be a 15% yield and a discount to book of 25-28%. The stock is too cheap. GLTA.
Bonzo, I had too much, couldn't see the bottom and feared the fall in RSO was company specific. However I think the bottom is close and after the last couple days seeing how BDCs were treated I don't think it's company specific to RSO. The market is rich but with RSO at a 31% discount to NAV and PNNT and MCC at 25% discounts to NAV the comparative values are unprecedented. I plan to take a position in RSO about a third the size of what I had previously. I plan to add to PNNT, MCC and TICC if the CC goes as I anticipate.
this is rediculous. Reits and BDCs were down big today. Rates have actually gone down the past few days. Also, the slipped up and let it's multi year forecast on rates, growth and inflation out of the bag and it looks very tame to me. All of this is overdone. I believe RSO reported income from interest rate spread on their portfolio of .09 last quarter. The spread is growing. With a 31.5% discount to book, the guidance to maintain a .17 dividend thru 2015, increasing NII and aggressive origanations volume and a significant amount of non recurring income available going forward it has gotten too cheap and is a buy. I suspect a rebound on Monday across the board but think RSO will be weak the next couple of days until the CC.
This is long, round about way of saying I plan to jump back in next week.
I did avoid several thousand dollars of the carnage so hoping the redo turns out better. GLTA.
So rates might go up. NRZ would benefit from rising rates but since it's a reit it goes down. Now it's easier to understand why BDCs are getting clobbered. The market is reacting without thinking. This is a golden opportunity for income investors. We actually get a conference call on many high income reits and BDCs ina few days. Is 2 years many will look back and say woulda shoulda coulda.
We are going to get an earnings release and CC in a few days. Based on the tone of the call it may turn out to be an excellent to acquire a quality income stock on the cheap.
If you listen to the last CC and generally believe it which I did then the recent market action is totally irrational. I have plenty but would think this is a great opportunity.
I do believe it is a value here. If you go back and read the last CC Art Penn gave a pretty good summary of what PNNT does and what you can expect. They are approaching 52 week lows but I think the earnings release in a couple of weeks will send the stock back up somewhat. BDCs are really out of favor. A couple of years form now we may all shake our heads and wonder why we didn't buy more at these prices.
You are correct. There is nothing wrong with the company. However, I did sell my entire position earlier this week and took a loss. I had more than 15,000 shares. The reason I sold is that I came to believe RSO was not the high yield opportunity I thought it was. The recurring business NII/affo is about half of reported affo. This company could pay a 10% dividend on NAV and probably sustain it. It might even make the current plan work which is to generate affo with non recurring events while they grow the portfolio enough to generate recurring NII. I hope they can do it. They might. But I just decided there were other, safer less frustrating ways to generate recurring sustainable income. GLTA.
The preferreds are most likely a good investment. But right now I have such a bad taste in my mouth from Rso I'm going to pass.
RSO is sound. It's just that it should pay a much lower dividend consistent with NII and use the non recurring to pay a special and build NAV. I think that's what the market is telling them but Cohen is in denial. He is a great cheerleader and unfortunately I bought into his cheer. Live and learn.
A point covered well. Why didn't they buy for their own personal account before June 15th? And to clarify, yes affo was guided at .70 but it is not quality affo. The sources are limited and not reoccurring. Maybe Cohen will execute and the NII line will cross the non recurring line at the right time. IPAs hopeful but have lost faith like the rest of the market. I hope he can do it but I think what will happen is next year we will have a div cut to .48 and be told that GOING FORWARD ALL IS WELL AND THE FUTURE IS GREAT. Sound familiar? GLTA.
I understand the blackout period. However, Cohen said he believed the stock was being being treated "unfairly" by the market and the buy back was going to start in earnest. This was on the last CC.I don't think he acted before the CC and doubt they did after. I really thought this one was going to be one to get rich slow with but I can not understand the complete breakdown in the preferred along with the common. There has to be something coordinated happening or someone knows something I don't.
The analysts gave me some ideas they thought were better than RSO. I was aware of these companies but never that excited about them. If these guys thought they were better than RSO and I thought RSO was better than they did one of us has to be wrong. In light of the price action recently on RSO I am afraid I was probably the one who was wrong. I thought there would be a rebound today but it's just getting worse. I am afraid the numbers, spread, NII and exotic affo are not moving in the correct direction at the appropriate speeds. If I am right then NAV will continue to decline as the dividend is not covered or the dividend will be cut again. They should have cut it to .48 to begin with and planned on a $4.00 pps. Things could have gotten better from there.
RSO is actually earning half of their dividend. The affo coverage we saw in the first quarter included affo from asset sales, debt repurchase and other adjustments. Their origination volume is doing great. What Cohen is betting is that he can cover dividends with core earnings plus "non recurring or limited self life affo generating transactions" until originations generate sufficient nii to cover the dividend. He has a better window to look out of than we do and decided to set the dividend at .64. At some point next year he will be able to have even a better view of the timing and amounts of these one offs and will decide to either increase the dividend, leave it the same or cut it.
I have been a big proponent of RSO but I spoke with some analysts who cover the stock and did not come away with a great feeling. They believed their were other better opportunities out there. As a result I bailed yesterday morning and took a loss. To somewhat sooth my disappointment over the loss I invested in RNP, UTF and RQI. the discounts on these CEFs is about 15% allowing $85,000 of dollars to buy $100,000 of assets. Of course the cash flow isn't that great but after speaking with the analysts I think the total return will be better and these funds provide an 8% cash flow.
If Cohen can keep the origination machine going, get the spread he needs and win the foot race I will probably have made an error. However, with what the prices have been the past few weeks there has not been any tremendous amount of insider buying. This tells me that even with the vantage point the insiders have they are not quite sure if the lines will cross at the appropriate time or if the dividend will have to be cut again. I think Cohen made a mistake when he reduced the dividend to 64. He has always been a cheerleader who is too optimistic. In retrospect I think a .48 dividend would have been better. This would allow things to get better for sure rather than maybe maybe not. GLTA
No buyers. Everyone interested is waiting for the earnings release. This is an orphan stock. It does not matter what happened last quarter only what happens next qtr. it's going to be that way until there is some confidence in the direction of the company. I know how current holders and prospective buyers feel. I have quite a bit of RSO and can't help but feel buyers remorse from time to time. But I am an income investor and would take a hit to income if I sold. This would be true even if the dividend were cut again to let's say .50. Now understand , I do not think this will happen but point out unless you think this company is going BK there is now reason to sell it if you are in it for income. GLTA