PBCT will offer subordinated debt at 4% interest. During the past several years, management has demonstrated that it is unable to put capital to work. Instead they emptied the company treasury paying an unsustainable dividend to shareholders so they could pay themselves unwarranted salaries and bonuses. If they were unable earn a profit on the free money that was laying around then, how will the make a profit with the cost of capital at 4%? The answer is that they won't. But they don't care, they have big lucrative jobs and you can't touch them.
During the last several years, PBCT management paid themselves, and the an unsustainable dividend to shareholders, with money from the company treasury. That money had been raised during a secondary offering just prior to the financial crisis. The last of the money was used for a small share buyback that created the illusion of an increase in EPS while profits actually fell during the quarter.
During the last several years, pbct management has used the cash raised from a secondary offering to pay the unsustainable dividends. During the last quarter, Barnes used most of the remaining cash to buy back shares. The next few quarters will be interesting as the last of the cash is exhausted.
You might consider taking the dividends off the table rather than reinvesting them. It could be a way to reduce the worry factor.
ARR is down today on the jobs news. The jobs news indicates the economy is improving, so investors expect a continuation or acceleration of the taper, which leads to lower demand for mortgage bonds, which leads to lower prices for mortgage bonds, which leads to lower book values for some MREITS, especially agency MREITS. It looks like the market might actually like the buyback. ARR is performing well today when compared to other agency REITS, primarily AGNC and NLY
14 million is a big number. But those 14 million shares were sold when the short positions were initiated, any resulting downward pressure goes into the share price when the shares are actually sold. After the short position is initiated, then the position really becomes a contract to buy the 14 million shares at some point in the future in order to cover the short positiions. The existing short position, coupled with the buyback does create future demand for the stock and provides some price support.
Blackstone has purchased over 5% of outstanding shares, and their interest in the company was reported to the SEC on Feb 3. The market probably sees Blackstone's position as a vote of confidence in the future of CNQ and so the shares get a little boost.
MREITS are structured, and run, to generate income. 90% of the money earned by NLY will be paid out in dividends. It does not seem likely that NLY can pay out about 22% in dividends over the next two years and also increase the share price by 65%. Be careful, NLY is considered a success if it sells for $11 two years from now and has paid the quarterly dividends. In fact, the objective is to increase the dividend, not the share price. You might consider buying 122 shares and reinvesting the dividends. Good luck
The banked earned less money in 2013 than in 2012. The company bought back some shares so it looks like the bank earned more per share than it earned in 2012. But Peoples Bank bought back the shares with money that already belonged to the shareholders. Management used your money to buy shares so they could tell you that they earned you more money......so they could continue to earn big salaries doing a poor job.
PBCT stock rises 20% during 2013 on the strength of a share buyback. The index of similar banks (BKX:IND) rose 34.99% during the same time without a share buyback. Total earnings for PBCT went DOWN during 2013 from 64 million to 60 million dollars. Barnes declares the year a success, vests his options, puts his feet up on the desk. How do I get that job?
It is remarkable that the stock is as high as it is. The dividend is .75/share but earnings are only .45/share. That clearly is not sustainable. The current PE for vale is 34 and iron miners are usually get a PE of 10-12. This quarter all the iron miners will announce big earnings. But, there is a tremendous amount of new capacity coming online from VALE, RIO, Fortesque and BHP and that capacity is going to be sold into a market with flat demand. China is about to start their own iron futures in an effort to impact the price of iron ore. You should feel lucky the price is where it is.............and you should sell.
You are only part right. NLY holds long-term mortgages that will decline in value as rates rise. It is management's job to make the best of that by hedging some risk while they turn over the portfolio. But you know that, so I am curious why you said, "short term borrowing costs are rising", because you must know that they are not.
The yields can affect the book value more than one might think because the book value is levered by about 6X. Any loss in the value of the bonds translates into a 6x loss on the books, depending on whatever hedges might be in place. Of course, the cost of hedging all the risks precludes any potential for earnings so it is a tight line to walk right now.
There will be some protection of book value. Crexus was about a billion, NLY book value about 10 billion, but the 10 billion is leveraged to control about 60 billion in mortgages. So you are looking at a couple percent of the whole value that can be sheltered in the commercial area. The bigger impact is that the commercial line can be leveraged to provided new capital for reinvestment when the smoke clears. Whenever that is.
My point is only that the dilution has not happened yet and that TC's accounting is very aggressive. How it plays out is not as clear as some on this board want to believe.
If the price of the bonds go up, then book value goes up. If interest rates go up, the book value goes down.
If the 10 yr Tr is 15.5% more expensive that 10 yr French notes wouldn't that mean that investors see the US as LESS Risky than France and so they are willing to accept lower rates?