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Yield On Chimera Investment Preferreds Is Up, But So Is The Risk

Published Mon, 24 Aug 2020 21:14:41 -0400 on Seeking Alpha

Seeking AlphaLong IdeasYield On Chimera Investment Preferreds Is Up, But So Is The RiskAug. 24, 2020 9:14 PM ET|| About: Chimera Investment Corporation (CIM), CIM.PA, CIM.PB, CIM.PC, CIM.PD, Includes: AGNC, AGNCM, AGNCN, AGNCO, AGNCP, BXMT, NRZ, NRZ.PA, NRZ.PB, NRZ.PC, STWDby: Savvy Preferred InvestorSavvy Preferred Investor Long-term horizon, medium-term horizon, dividend investingSummaryChimera Investment Corp. commons have dropped considerably as a consequence of the COVID-19 pandemic.
Chimera Investment Corp. preferreds are also down, resulting in higher yields.
CIM preferreds offer yields as high as 9.31% but they come with significant risk.
Despite the lower yield the preferreds provide a lot more safety than the commons.
Preferred Series C from Chimera Investment Corp. (CIM.PC) has an attractive 9.31% yield at current prices, but Chimera Investment Corp. (CIM) has been hit hard by the pandemic, more so than most other REITs. Because of the company's poor performance, weak financials and uncertain prospects for REITs, I would advise caution when considering investing in this company.
REITs, like companies in the shipping industry, have been hit hard by current market conditions, and Chimera Investment Corp. is no exception. The key is to find those companies that have the resources to survive the downturn and not go bankrupt while benefiting from the increased dividend yields resulting from the lower prices.
Bear in mind that I am not a speculative investor looking to buy low and sell high. Rather, I am interested in lower prices because of the impact on the dividend yields and receiving those for as long as possible. An added benefit of acquiring preferred shares at below the par value is that, in the event that they pass the callable date and the company buys them back, I will profit by whatever the difference is between what I purchased them for and the par value, usually $25. For this reason I never buy preferreds priced above the call... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
NEW RESIDENTIAL INVESTMENT 14.98   18.0 0.83 2.00 13.28
AMERICAN CAPITAL AGENCY 15.64   0.0 -1.54 1.92 12.21
STARWOOD PROPERTY TRUST 24.39   18.5 1.32 1.92 7.95
BLACKSTONE MORTGAGE TRUST 36.16   14.5 2.49 2.48 6.94


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