TWO

Omega Healthcare and Holly Energy Partners: Case Studies in REIT and MLP Income Evaluation

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An assessment of a REIT’s or MLP’s dividend/distribution strength not only should reflect firm-specific fundamentals, but also external market conditions, which are paramount to the sustainability of most any REIT’s or MLP’s payout. Let’s remind readers of this important dynamic, which is captured via the two different Dividend Cushion ratios, and walk through what goes into the analysis we pursue when making a change with respect to our assessment of a company’s dividend health or safety. By Kris Rosemann and Brian Nelson, CFA Real estate investment trusts (REITs) and master limited partnerships (MLPs) are not your typical operating companies. These business structures have certain provisions that incentivize lofty and growing dividends/distributions, which sounds good, but because these business models tend … Read more

Malkiel Balks, Yellen Talks

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Let’s first address how research in the financial industry is becoming more and more open to combining value and momentum considerations. We’ll also cover a few takeaways from the stress tests and some ‘strong’ talk from Fed Chair Janet Yellen. By Brian Nelson, CFA It was 1973, and a Princeton economist by the name of Burton Gordon Malkiel had just published A Random Walk Down Wall Street, a book that would turn into one of the most influential studies in support of the efficient markets hypothesis. The book would suggest that asset prices typically exhibit signs of a “random walk,” and as a result, an investor could not consistently outperform market averages in part due to powerful reversion-to-the-mean tendencies. Three … Read more

Dividend Increases/Decreases for the Week Ending June 16

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Below we provide a list of firms that raised/lowered their dividends during the week ending June 16. 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 Bed Bath & Beyond (BBBY): now $0.15 per share quarterly dividend, was $0.13. Capital Southwest (CSWC): now $0.21 per share quarterly dividend, was $0.19. Caterpillar (CAT): now $0.78 per share quarterly dividend, was $0.77. El Paso Electric (EE): now $0.335 per share quarterly dividend, was $0.31. Farmers & Merchants Bancorp (FMAO): now $0.25 per share quarterly dividend, was $0.23. FedEx (FDX): now $0.50 per share quarterly … 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

Dividend Increases/Decreases for the Week Ending March 17

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Below we provide a list of firms that raised/lowered their dividends during the week ending March 17. 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 AirBoss of America (ABSSF): now CAD 0.07 per share quarterly dividend, was CAD 0.065. Ashford Hospitality Prime (AHP): now $0.16 per share quarterly dividend, was $0.12. CareTrust REIT (CTRE): now $0.185 per share quarterly dividend, was $0.17. CECO Environmental (CECE): now $0.075 per share quarterly dividend, was $0.066. Dollar General (DG): now $0.26 per share quarterly dividend, was $0.25. Federal Agricultural Mortgage (AGM): now $0.36 per … Read more

Valuentum Strives To Be the Gold Standard in Equity Research

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This article was originally published July 17, 2013. Valuentum’s Best Ideas portfolio and Dividend Growth portfolio continue to exceed their respective goals, but the firm’s research on the mortgage REIT industry has put it in a class by itself. In this article, please find a graphic portrayal of its call on the mREIT industry. Maxim, KBW, RBC, Edward Jones, Seeking Alpha, Wunderlich, Citi, Evercore, and JP Morgan were all behind the curve. Will still more research shops come around? 1)    September 13, 2012. 2)    May 6, 2013. 3)    May 6, 2013. http://blogs.barrons.com/focusonfunds/2013/05/06/mortgage-reit-funds-in-focus-jefferies-says-investors-underestimate-mreit-risks/ 4)    May 26, 2013. /20130526_1 5)    May 30, 2013. http://www.thestreet.com/story/11937184/1/mortgage-reit-sell-off-overdone-on-rate-fears-kbw-rbc.html?puc=yahoo&cm_ven=YAHOO 6)    June 7, 2013. http://seekingalpha.com/symbol/agnc/currents/2 7)    June 24, 2013. http://seekingalpha.com/article/1515952-american-capital-agency-corp-book-value-resilience-in-the-face-of-rates-back-up 8)    July 8, 2013. http://www.analystratings.net/ratings/Downgrades/7-8-2013/ 9)    July 9, … Read more

Dividend Increases/Decreases for the Week Ending March 18

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Image: Williams-Sonoma’s dividend strength continues to impress; source: Mike Mozart Below we provide a list of firms that raised/lowered their dividends during the week ending March 18. 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 Air Products and Chemicals, Inc. (APD): now $0.86 per share quarterly dividend, was $0.81. CareTrust REIT (CTRE): now $0.17 per share quarterly dividend, was $0.16. Children’s Place Retail Stores (PLCE): now $0.20 per share quarterly dividend, was $0.15. Global High Income Fund (GHI): now $0.0658 per share monthly dividend, was $0.0657. Granite Real Estate (GRP.U): now C$0.203 … Read more

Are You Still Trying to Catch Lightning with American Capital Agency?

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Investors familiar with the mortgage REIT space that have spent any time on our website know of our groundbreaking call on the industry. Please have a look here. American Capital Agency (AGNC), one of the most prominent operators in the mortgage REIT space, reported yet another disappointing quarter. It continues to be painful to write how much we don’t like the uncertainties regarding the broader mortgage REIT environment. Some of the more bullish research shops appear to finally be throwing in the towel. Though the yields on some of the mortgage REIT equities appear attractive, the risks of further dividend cuts continue to grow. Shares of American Capital currently yield ~13%, for example. In the third quarter, American Capital Agency … Read more

American Capital Agency’s Book Value Declines…Again

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The success of mortgage REITs in the past has largely been the result of an unhedged (unprotected) portfolio completely exposed to the vicissitudes of interest rates. Mortgage market dynamics are inherently difficult to predict, and most mortgage REITs can only bolster economic returns as measured through gross ROEs via adding additional leverage. Spread income has always been a less-material driver to book value than other comprehensive losses, or when unrealized losses on a mortgage REIT’s investments are marked to market. Very few analysts have the ability to effectively analyze these complex instruments, and while we’ve been correct about the risks related to their investment opportunities, we continue to believe it is borderline irresponsible for financial advisors to be using mortgage … Read more