CIM

Stay Away from Mortgage REITs!

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Image Source: Mortgage REITs have underperformed the broader stock market for years, and we don’t think individual investors and financial advisors should be dabbling in the mortgage markets via these instruments. By Brian Nelson, CFA On September 28, mortgage REIT (“mREIT”) Invesco Mortgage Capital (IVR) cut its dividend 28%, to $0.65 per common share. The bond markets have been experiencing a lot of pain of late, and mortgage rates have shot up considerably since the Fed started hiking. We think this spells trouble for mortgage REITs, which already suffer from highly unpredictable mortgage market dynamics. So far in 2022, the iShares Mortgage Real Estate Capped ETF (REM) has fallen more than 40% (on a price-only basis), and while its forward … Read more

Dividend Increases/Decreases for the Week of September 23

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Below we provide a list of firms that raised their dividends during the week ending September 23. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                Accenture (ACN): now $1.12 per share quarterly dividend, was $0.97. American Tower (AMT): now $1.47 per share quarterly dividend, was $1.43. Bank First (BFC): now $0.25 per share quarterly dividend, was $0.22. Calvin B. Taylor Bankshares (TYCB): now $0.33 per share quarterly dividend, was $0.30. Change Healthcare (CHNG): now $2.00 per share special dividend. CVB Financial (CVBF): now $0.20 per share quarterly dividend, was $0.19. … Read more

Mortgage REITs Have Underperformed Significantly the Past Several Years

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Image: An ETF that tracks the mortgage REIT industry has fallen more than 31% on a price-only basis, while an ETF that tracks the S&P 500 has advanced more than 160% on a price-only basis, as measured from May 2013. By Brian Nelson, CFA Mortgage REITs (REM) are popular vehicles because of their deceptively enticing dividend yields, but we’ve never been bullish on the group. We’re reiterating our take today that these instruments are not for the individual investor or even prudent financial advisor and are more complicated vehicles than many investors believe. In May 2013, we first starting warning about the group, and the performance, as shown in the image above, hasn’t been pretty. On a price-only basis, the … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.

Mortgage REITs Still Dangerous Income Vehicles

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Image: Since late May 2013, mortgage REITs, as measured by the iShares Trust Mortgage Real Estate ETF (REM), middle, have fallen more than 20%, while the master limited partnership space, as measured by the Alerian MLP ETF (AMLP), has fallen by nearly 45%, bottom. Meanwhile, the S&P 500 (SPY) has rallied more than 75%, all on a price-basis, top.  By Brian Nelson, CFA There’s nothing “safe” about mortgage REITs (REM). The industry caught a lot of attention with the high-profile performance of some of the larger players, including AGNC Investment (AGNC) and Annaly Capital (NLY), in years past, but the hype has fizzled out. Not only has the mortgage REIT industry vastly underperformed a broad market benchmark such as the … Read more

Understanding the Phenomenon of “Price Risk” in High Yield

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  Image Source: Julien Carnot We want you to learn about a unique risk innate to the high yield space like the back of your hand. We’ll explain the “information contained in prices” and talk about what you should be on the lookout for, the “avalanche effect.” Order the High Yield Dividend Newsletter here. — By Brian Nelson, CFA — I received a question from a dear member of ours, and I think it may be helpful that I share the response. The question had to do with why we may be ultra-cautious on high-yielding stocks that are facing considerable price declines. The risk described below makes the high yield space uniquely different than other equity strategies, in our view, … Read more

Podcast: The Hazards of Mortgage REITs

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President of Investment Research Brian Nelson talks mortgage REITs and the concept of spread risk that may lead to steep book value declines and weakened dividend health across the industry. ~5 mins. If you cannot view the video below, please view the transcript that follows or select the link here. Kris Rosemann: Hi, I am Kris Rosemann for Valuentum Securities. Today on our podcast President of Investment Research Brian Nelson is going walk us through some of our thoughts on mortgage REITs (REM). Brian could you explain to us why we at Valuentum don’t like mortgage REITs and maybe go through some of the risks individual investors should be concerned with that are not as prevalent as a normal operating … Read more

Dividend Increases/Decreases for the Week Ending November 4

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Below we provide a list of firms that raised/lowered their dividends during the week ending November 4. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week Aaron’s (AAN): now $0.0275 per share quarterly dividend, was $0.025. Alliance Bernstein (AB): now $0.45 per share quarterly dividend, was $0.40. American States Water (AWR): now $0.242 per share quarterly dividend, was $0.224. Archrock (AROC): now $0.12 per share quarterly dividend, was $0.095. B&G Foods (BGS): now $0.465 per share quarterly dividend, was $0.42. Big 5 Sporting Goods (BGFV): now $0.15 per share quarterly dividend, was … Read more

Dividend Increases/Decreases for the Week of November 3

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Below we provide a list of firms that raised their dividends during the week ending November 3. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week                          AllianceBernstein (AB): now $0.65 per share quarterly dividend, was $0.61. Amcor (AMCR): now $0.1250 per share quarterly dividend, was $0.1225. American Financial (AFG): now $1.50 per share special dividend, was $0.71. Banco Santander (SAN): now $0.085 per share semi-annual dividend, was $0.063. Black Diamond Group Limited (BDI:CA): now CAD 0.03 per share quarterly dividend, was CAD 0.02. Brixmor Property (BRX): now $0.2725 per share … Read more