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11% Yield From Haywire Market And A Two Harbors' Preferred Share

Published Mon, 16 Mar 2020 23:42:15 -0400 on Seeking Alpha

High yields are going on sale.
Preferred shares got hammered in the mortgage REIT sector.
Prices should continue to swing wildly as the market sees high levels of volatility.
This research report was produced by The REIT Forum with assistance from Big Dog Investments.
The market has gone haywire.

Spreads between MBS and Treasuries increased significantly, which can have a negative impact on book values. However, we’re seeing common shares trading down 10% to 25% on the day. Remarkably, preferred shares are showing similar declines. In some cases there are preferred shares falling by over 30%. The case we will be talking about today is a preferred share from Two Harbors (TWO).
New Positions - TWO-E
We picked up 663 shares of TWO-E (TWO.PE) at Fidelity:

Source: Fidelity
They have already fallen a little further:

Source: The REIT Forum
We’re looking at a stripped yield in excess of 11% for a preferred share. That’s remarkably high. TWO does take on credit risk and does own MSRs, also known as mortgage servicing rights, which are subject to prepayment risk. However, their overall portfolio was built to reduce volatility in book value. That’s great for the preferred share investor.
The power of volatility
While trying to get some content from The REIT Forum to the public, the market is taking wild swings. In less than 24 hours, TWO-E has rallied almost $3.00:

TWO-E is still within our strong buy range, but so is just about every preferred share that we cover. We’re mostly looking to get into preferred shares with a risk rating of 1 or 2. However, we are willing to purchase higher-risk preferred shares when great opportunities arise.
Preferred shares are currently on sale. We believe now is a great time to look at getting more preferred shares in your portfolios.
We will now dive into the metrics for TWO-E and how we evaluate shares.
Ratings
• Our current rating for TWO-E:
... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
TWO HARBORS INVESTMENT 13.28   0.0 -2.81 1.60 12.02

TWO HARBORS INVESTMENT - TWO
TWO HARBORS INVESTMENT - TWO  


Older articles featuring Two Harbors Investment (TWO):
Armour Residential REIT: Don't Trust The Yield
Here's How To Enhance A 9.6% Yield
How To Retire: Dividend Champions In The Time Of Coronavirus
Dividend Yields Up To 40% - Yeah It Happened
Opportunities In The Remaining High-Yield 2x Leveraged ETNs
12% Yield Comes With Risk, The Market Messed Up On Capstead Mortgage
10% Yields Created By Hectic Market, Preferred Shares Offer Huge Discounts
Annaly Capital's BV, Dividend, And Valuation Versus 20 mREIT Peers (Post Q4 2019 Earnings - Attractive Valuation)
50 Top U.S. REITs By Gains And Yield By March Broker Targets
50 Top U.S. REITs By Gains And Yield Based On February Broker Forecasts

More