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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

Zillow Continues to Disrupt Real Estate Market

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Image Source: Zillow Group Inc – May 2020 IR Presentation By Callum Turcan Record low interest rates for mortgages in the US, largely a product of the Fed’s monetary stimulus measures (quantitative easing and near-zero interest rates), has gone a long way in stimulating demand for homes. According to the US Census Bureau, the national homeownership rate stood at 67.4% in the second quarter of 2020, up ~260 basis points from the same period the prior year. For reference, the domestic homeownership rate has been steadily climbing higher since 2015-2016 (when homeownership rates were in the low-60s% range) according to data provided by the US Census Bureau. Homeownership rates peaked in 2005-2006 at the high-60s% level before sliding significantly lower … Read more

Dividend Increases/Decreases for the Week September 25

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Below we provide a list of firms that raised their dividends during the week ending September 25. 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 $0.88 per share quarterly dividend, was $0.80. Artesian Resources (ARTNA): now $0.2571 per share quarterly dividend, was $0.2496. Bancolombia S.A. (CIB): now $0.309 per share quarterly dividend, was $0.285. Bank of South Carolina (BKSC): now $0.17 per share quarterly dividend, was $0.16. The First of Long Island (FLIC): now $0.19 per share quarterly dividend, was $0.18. Fortis (FTS): now CAD 0.505 per share … Read more

Dividend Increases/Decreases for the Week Ending June 26

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Below we provide a list of firms that raised their dividends during the week ending June 26. 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 Andlauer Healthcare Group Inc. (ANDHF): now $0.05 per share quarterly dividend. ARMOUR Residential REIT (ARR): now $0.10 per share monthly dividend, was $0.09. AT&T 4.750% PFD SER C (T.PC): now $0.2969 per share quarterly dividend, was $0.2408. Delmar Bancorp (DBCP): now $0.025 per share dividend. Deswell Industries (DSWL): now $0.09 per share semi-annual dividend, was $0.08. Dynex Capital, Inc. 6.9% Series C PFD (DX.PC): now $0.4313 … Read more

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

Prepared Remarks From Nelson Exclusive Conference Call June 30

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Read President of Investment Research Brian Nelson’s prepared remarks for the yearly roundup conference call, held for Nelson Exclusive members. If you would like to subscribe to the Nelson Exclusive publication, please learn more about the publication here. The Nelson Exclusive publication does not reflect real performance. Performance is hypothetical and does not represent actual trading. Ladies and Gentlemen, Thank you very much for joining us on the first conference call for members of the Nelson Exclusive publication. The first year of the publication has surely been an exciting one for all involved. When I first wrote the introductory letter of the Nelson Exclusive on July 1, 2016, we were well-aware the market had laid down the gauntlet for this publication. … Read more

Dividend Increases/Decreases for the Week Ending June 23

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Below we provide a list of firms that raised/lowered their dividends during the week ending June 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 ALPS | Dorsey Wright Sector Momentum ETF (SWIN): now $0.05305 per share quarterly dividend, was $0.03923. ALPS Alerian Energy Infrastructure ETF (ENFR): now $0.2405 per share quarterly dividend, was $0.15615. ALPS Emerging Sector Dividend Dogs ETF (EDOG): now $0.312 per share quarterly dividend, was $0.095. ALPS Equal Sector Weight ETF (EQL): now $0.32887 per share quarterly dividend, was $0.27069. ALPS International Sector Dividend Dogs ETF (IDOG): … 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

Valuentum’s 3 Breakthroughs in the Field of Finance and More

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Valuentum’s President Brian Nelson pauses for a picture before speaking at the CFA Society of Houston in March 2017. By Valuentum Editorial Staff Let’s cover Valuentum’s 3 major breakthroughs in the field of finance. The first one is big and may challenge you to rethink everything you think you know about investing. 1. On a logical framework, Valuentum has debunked John C. Bogle’s landmark syllogism that has paved the way for the concept of index investing. Index investing has been built on a logical shortcoming, whether supported by evidence or not. We think it is important that the investment community know of this. Read (pdf): The “Luck” and “Randomness” of Index Funds (2018), Brian Nelson, CFA See video documentation: /FALLACY_of_Index_Funds To … Read more