mREIT Chimera Investment Corporation Sells a Tasty Preferred Issue
By: Tim McPartland,
mREIT Chimera Investment Corporation (NYSE:CIM) has sold a 8% preferred stock issue. This is a tasty coupon and may be worth purchasing when the price stabilizes. Shares, which have begun trading on the OTC Grey market, under the temporary ticker symbol CMIAP are in the $24.48-$24.75 area closing Friday at $24.60.
As we take a quick look at the shares of the preferred stocks of other mREITs, such as Annaly Capital (NYSE:NLY), Armour Residential (NYSE:ARR), Invesco Mortgage Capital (NYSE:IVR) as well as others we note that they are not trading strongly with many of them trading below $25/share. Rightly or wrongly mREITs trade weakly, likely because of the complexity of their financials, mREITs trade at a discount. The spread between short term rates and long term rates has narrowed very significantly over the last 5 years and this has weakened the earnings of mREITs which benefit from a wider spread in interest rates.
These shares have the typical REIT preferred terms, optionally redeemable in about 5 years, cumulative in respect to dividends and non qualified for favorable tax treatment.
While we think these shares are a reasonable holding for investors able to tolerate some moderate risk, we don’t believe there will be much potential for capital gains for those pondering a quick flip.
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