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People's United Financial Inc. Message Board

serpentine290 5 posts  |  Last Activity: Apr 23, 2015 6:58 PM Member since: Sep 12, 2008
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  • Reply to

    Does the book value mean anything to NLY?

    by rustyscigars Apr 15, 2015 9:41 PM
    serpentine290 serpentine290 Apr 21, 2015 6:06 PM Flag

    It is true that NLY could buy back its own shares at a 20% discount. The shares represent a portion of the bond portfolio So buying the shares is like buying mortgage backed bonds at a 20% discount. Since they are in the business of holding and trading bonds, you might wonder why they don't do a buyback. The answer is simple, NLY management is paid 1% of assets under management through a separate management agreement. If management authorizes a share buyback, it would be good for shareholders, but bad for executive compensation. If fact, the shares would never sell off to this level of discount if management would act on behalf of shareholders and take advantage of the arbitrage.

  • serpentine290 by serpentine290 Apr 23, 2015 6:51 PM Flag

    The book value of the shares is $13.10; shareholders own $13.10 of mortgage securities for each share of NLY that they own. So the the dividend rate is actually 9.2% because that is what we are paid on the value of the shares we own. The shares sell at a 20% discount because the market believes our money is at risk. Maybe they should just sell our securities and mail us our $13.10. That would amount to more than 2.5 years of dividends. I would take the money now. We have to hope that the share price doesn't fall further, and that the dividend is not cut, so we will break even 2.5 years from now.

  • Reply to

    12-26-2014, NLY Share Price was $11.34

    by chuck_960 Apr 21, 2015 7:00 PM
    serpentine290 serpentine290 Apr 23, 2015 6:40 PM Flag

    You might be right about the market looking forward. The share price has fallen about 10% and the shares have a 20% discount to book value. That dismal performance might be the market pricing in anticipated rate hikes before they happen.

  • Reply to

    NLY Worth $12 to $13

    by fishinanddreaming Apr 15, 2015 11:03 PM
    serpentine290 serpentine290 Apr 23, 2015 6:58 PM Flag

    You make some legitimate points. However, since 1998 NLY has returned just over 11% annually while the share price has declined about 40 cents. That time period includes two occasions when the yield curve inverted.

  • Reply to

    NLY Worth $12 to $13

    by fishinanddreaming Apr 15, 2015 11:03 PM
    serpentine290 serpentine290 Apr 23, 2015 6:55 PM Flag

    As recently as 2012, NLY traded right around book value. The share price has fallen to around 80% of book value because the market is demanding a 11.50% return as compensation for the risk of owning the shares. If the shares traded at book value now, then the dividend rate would be only 9.2%

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