2011: The Year Chimera Prepared for Carnage
18.05.12
Data from Morningstar, S&P Capital IQ, and Motley Fool CAPS.
What happened at Chimera this year?
What a difference a year makes. Chimera's stock didn't have a three-peat banner year after the 20%-plus gains of 2009 and 2010. But investors don't buy mortgage REITs for stock appreciation -- they're after yields. Chimera's payouts partially compensated for its stock decline, though quarterly payouts have fallen from $0.17 to $0.11 since last December, largely because of big losses on investments.
But on the whole, residential mortgage REITs like Chimera have hit a bonanza over the past few years. As the Federal Reserve lowered overnight interest rates to nearly 0% to support the struggling economy, Chimera's cost of borrowing has held much lower than it otherwise would have, pushing up its interest-rate spread -- the difference between the interest rate it collects and the rate it borrows -- to a whopping 4.9% as of last quarter. The interest-rate tailwind was the key reason I purchased shares of the stock for the real-money publicly facing Dada Portfolio that I co-manage.
Source: Motley Fool