It is time to elevate our portfolio to new heights. The financial world is a place where opportunities knock, but sometimes we must bid adieu to a golden past with hopeful eyes on a brighter tomorrow. We’ve been delving into the market, securing preferred shares, and orchestrating strategic moves. With precision, we aim to command a 13% dividend yield and a 12% rise in value.
From September through November, our acquisitions centered heavily on preferred shares, particularly CIM-B (CIM.PR.B) and CIM-D (CIM.PR.D).
Our stakes in both CIM-B and CIM-D amount to approximately $135,671.56. These are not mere playthings – they are tangible, solid investments.
An impending floating date has us giddy with anticipation. Come 3/30/2024, we’re looking at a potential surge in yields. With share prices and interest rates remaining stable, the stripped yield could hit a whopping 13.14% on CIM-B and 12.9% on CIM-D, up from the current 9.19% and 9.36% respectively. The meteoric rise in dividends makes these shares undeniably appealing.
Our aim is not to cling to these shares forever, but rather to capitalize on the ascension of their prices. Assuming shares reach $25.00 when the floating rate kicks in, investors selling at that price would land returns equivalent to that of a call. By our calculations, the annualized yield to call stands at approximately 60% for CIM-B and 68% for CIM-D, achieved via two fixed-rate dividends and the necessary capital gain for shares to reach $25.00. Even if shares trade around the $24.00 or $23.00 mark, it would still constitute a commendable capital gain alongside two dividends.
To counter the risks of a potential economic downturn or a Federal Reserve rate slash, we believe the risk/reward profile here is most favorable.
While we’ve dabbled in CIM-B previously, our forays into CIM-D are relatively fresh, and the annualized returns have been robust.
Our prior trades, marked by strategically timed exits and entrances, were underpinned by thoughtful decision-making. Some sales may have occurred at prices lower than our most recent purchases, but the returns have still been satisfactory. Sacrifices are simply a part of the investment game, and we’re willing participants.
Our intent is not to eternally tether ourselves to these shares. We’ve hitched our wagon to them for their attractive yield and potential rise. Upon reaching the $25.00 threshold, we envisage redirecting our capital to greener, more lucrative pastures. While a 13% yield on cost may sound sweet, we’re always on the lookout for even sweeter uses of our capital.
In our closing moments, we present tables and charts tracking the sector for both common and preferred shares to enlighten our readers.
Here’s a quick table detailing common shares to be featured in our comprehensive charts:
For any stock not covered here, readers can still find them in in-depth comparative charts, inclusive of price-to-book value, dividend yields, and earnings yield.
For insights into mortgage REITs, they can refer to specific charts for AGNC, NLY, DX, ORC, ARR, CHMI, TWO, IVR, EARN, CIM, EFC, NYMT, MFA, MITT, AAIC, PMT, RITM, BXMT, GPMT, WMC, and RC.
Similarly, for BDCs, charts are available for MAIN, CSWC, ARCC, TSLX, TPVG, OCSL, GAIN, GBDC, SLRC, OBDC, PFLT, TCPC, FSK, PSEC, and MFIC.
This is the ultimate hub for real-time, comprehensive sector-wide comparisons, a service found nowhere else.
Note on Book Values
We’ve updated the charts to reflect Q3 2023 book values, providing an accurate snapshot. For Q2 2023 unreported values, we’ve chosen to maintain their omission to avoid distortion.
Residential Mortgage REIT Charts
Readers should note that while Q3 2023 book value per share is used in public articles, our proprietary estimated book value per share drives our targets and decisions. PMT and NYMT lack an earnings yield metric due to the absence of a quarterly “Core EPS” figure. Caution is warranted when analyzing the consensus estimate, especially in light of the increased dissimilarity in earnings metrics among REITs through late 2022.
Commercial Mortgage REIT Charts
To enhance readability, our changes to the coloring of shared charts accommodate the transition of the first fixed-to-floating shares into floating rates. Special attention should be paid to the “Floating Yield on Price” metric for shares already floating, as it assumes greater significance.
Beyond mere charts, we offer readers access to additional metrics for preferred shares, assimilating them into our comprehensive discourse on mortgage REITs. We’ve integrated a series on preferred shares into our coverage of common shares, ensuring the spotlight is on preferred shares boasting cumulative dividends.
For the purposes of organization, we’ve condensed column names for better arrangement and comprehension.
Our vision is simple: we strive to maximize total returns, attaining mastery through strategic trading. Typically, we navigate through the common shares and BDCs with calculated moves, leveraging the inefficiencies in stock prices and banking on the convergence of share prices around book value. While preferred shares and equity REITs make up a fraction of our portfolio, we encourage investors to amplify their usage of these assets.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.