Silicon Investor - REITS - Buying 1 - 2 weeks before going ex-dividend

[Carolyn] Thank you so much! After all this time, I did not expect a reply. My husband is ...

Carolyn — 3/6/2018 8:18:44 PM

Thank you so much! After all this time, I did not expect a reply. My husband is invested in real estate - rental properties basically. Putting money in banks is ridiculous, so he is looking at reits as a place to park it as well as S&P funds.

[Mr. Sunshine] Hi Carolyn, I am getting back on SI and the stock market after a several year ...

Mr. Sunshine — 3/6/2018 1:23:47 PM

Hi Carolyn, I am getting back on SI and the stock market after a several year hiatus. Not much of value out there except REITs. My REITs currently are O, OHI, SBRA, PDM, RPAI and a few others. Be careful with Retail

[Carolyn] I am hoping someone is still here! Is there such a thing as a REIT scanning or c...

Carolyn — 9/30/2017 11:53:28 AM

I am hoping someone is still here! Is there such a thing as a REIT scanning or comparison platform? We are hoping to invest in some REITs.

Thank you.

[Terry Whitman] Sorry about the delay. I still hold HR, it has done well for me for several yrs....

Terry Whitman — 2/27/2013 6:34:48 PM

Sorry about the delay. I still hold HR, it has done well for me for several yrs. now.
Most REITS have done well however, so throw a dart, I guess..

Any faves for U?

TW

[Elroy] AGNC and NLY both seem like good candidates to have a runup prior to ex-div date...

Elroy — 8/11/2012 8:37:07 PM

AGNC and NLY both seem like good candidates to have a runup prior to ex-div dates in Sep. AGNC went from 35 to 33 over two trading days Aug 3-7 weekend. NLY went from 17.25 to 16.64 over the same two day period.

They might get back to those peak levels before the ex-div.

[bob wallace] Hi - it's been a long time since I posted to this board or to Silicon Investor i...

bob wallace — 8/11/2012 11:46:40 AM

Hi - it's been a long time since I posted to this board or to Silicon Investor in general - but I recently decided I needed to join the crowd and get some return on my otherwise idle cash.

I was wondering if anyone was interested in the original intent of this topic, which was to trade mREITS - specifically to buy and sell them in weeks before the the ex-dividend date.

There are a couple of reasons I am interested in doing this:

1) mREIT dividends do not get special tax treatment - they are ordinary income
2) I am drawing SS now, and I find that a few thousand dollars in dividends tend to cause my SS to get taxed, thus increasing my over all tax liability.
3) I have quite a big loss carry forward from 2001, which I would like to draw down before I die!
4) possibility that dividends will be cut as time goes on, which in turn will cause declines in share price

Bernanke has clearly said that rates will stay at zero until late 2014 - so that should give mREIT investors at least another 18 months. However, right at the moment, mortgage rates are decreasing, compressing the REIT margins causing NLY and others to cut dividends. When mortgage rates start going up, it will be more interesting: the margins should increase [through 2014], but prepayment may also increase as people say "whoa! I'd better refinance now!" . NLY management has been saying that prepayments are low relative to rates [ not sure exactly understand that, but I get the gist], implying that as the housing market recovers, and banks get a bit more lenient, prepayments may rise as owners refinance.

5) Secondaries. I never paid much attention to secondaries until I recently got creamed by two large non-REIT positions which each offered a secondary immediately after my purchase - recovery is going to take awhile. One way to make up for compressed margins is to sell more stock....

So all in all, I am becoming somewhat adverse to holding REITs - however, they do make a nice return.

So, why not trade the mREITS in such a way to make the dividend, but avoid the exposure to big drops in share price. As the originator of this thread said - most people do not like trading for small gains - but small gains over time are just as profitable as holding for the dividend

many of the REITS have had predictable price moves and trend lines since last October -- I am going to try and identify some of those and start trading for the dividend rather than collecting it.

Bob Wallace

[Mr. Sunshine] Thanks for all the replies. I bought a few shares of NLY a few months ago that ...

Mr. Sunshine — 7/19/2012 5:57:40 PM

Thanks for all the replies. I bought a few shares of NLY a few months ago that have done well, but all the mREITs have had such a good recent run that I will wait a while before buying more. Did put a low limit order in for REM in my IRA. I know it is not the most efficient way to invest in mREITs becaue of the 1/2% fee, but thought the diversification is worth it for a small position.

[Elroy] Gotta be quick with these mREITs, I was recommending CYS a few days ago at $13.8...

Elroy — 7/16/2012 12:23:40 PM

Gotta be quick with these mREITs, I was recommending CYS a few days ago at $13.80, now it's already up to $14.12. The sector has been on a tear lately.

The only one not going well is CIM. They have some accounting issues, and have cut the dividend repeatedly, so I guess it makes sense until the bleeding stops. Still, with the shares at $2.34, and Dec CIM calls offered at 40 cents, that's sort of tempting. You're only paying 6 cents over intrinsic value, and its possible that before Dec they 1- work out their accounting issue, 2- stop reducing the dividend, and 3- trade back up to their book value which is (I think) $2.70. If it gets to $2.70 then the calls would go to at least 70 cents, a 75% gain from 40 cents.

That's not all that crazy of a trade if you ask me.

[Elroy] CYS is probably a "safe" mREIT to buy right now. The just did a secondary, so y...

Elroy — 7/12/2012 7:59:11 AM

CYS is probably a "safe" mREIT to buy right now. The just did a secondary, so you don't need to worry about that for another three months. They also announced their preliminary Q2 results, which were good with book value up to about $13.52 and GAAP EPS of ~88 cents, easily covering the 50 cent dividend.

So if you buy it now for about $13.80, you're only paying 1.02x book, and its unlikely to get a negative shock from a secondary or poor quarterly results. In fact, I think I'll buy some!

[KaiserSosze] I am cautious about buying the mREITs knowing they will crash when interest rate...

KaiserSosze — 7/10/2012 11:40:46 AM

I am cautious about buying the mREITs knowing they will crash when interest rates go up, especially after the run up.

I'm curious, when do you think this might happen (I would guess 18-24 months)? Also, what's your definition of "crash"? I could see the dividend getting cut, but do you really think the stock gets trashed (or are you just talking about slower or no growth)?

Thanks

[Elroy] In your opinion, what are the best mRIETs out there, and why, at current prices...

Elroy — 7/10/2012 10:17:09 AM

In your opinion, what are the best mRIETs out there, and why, at current prices?

The best has been AGNC, but it has had such a nice run up in share price that it's really hard to buy now. It's at about 1.2x book and a 14% yield.

I guess IVR or NLY would be my preferred safer picks. However, with earnings season up in the next two weeks, and the next dividend for most of them not to be paid until late Sep, I don't think you need to hurry. I'd wait until after earnings season, see where book values have shifted, and then decide. It would stink to buy one today, only to find two weeks from now that it's book value has declined so the share price falls accordingly.

If you just can't wait, ARR just did a secondary today, and trades ex-dividend on Thursday, so that one might be good to buy on this Friday or Thursday. They pay dividends monthly, so the ex-div thing is a smaller deal for them than the quarterly payers. They will pay a dime per month for Q3.

[Mr. Sunshine] I would ignore what you read on Seeking Alpha, lots of poor analysis there if y...

Mr. Sunshine — 7/10/2012 9:56:46 AM

I would ignore what you read on Seeking Alpha, lots of poor analysis there if you ask me

My comment about Seeking Alpha was a tongue in cheek way of saying the same thing. I will read it for some ideas and thoughts, but usually realize that i know more than the arthur.

I am cautious about buying the mREITs knowing they will crash when interest rates go up, especially after the run up. If we are entering a Japanese style long term stagnation period though, they might be the best buy on the market.

In your opinion, what are the best mRIETs out there, and why, at current prices?

[Elroy] I would ignore what you read on Seeking Alpha, lots of poor analysis there if yo...

Elroy — 7/9/2012 8:41:01 AM

I would ignore what you read on Seeking Alpha, lots of poor analysis there if you ask me.

NLY and most of the mREITs seem like good investments as long as short term rates stay low, which is expected for at least the near future. The only bummer about the mREITs now is almost all of them have had very nice price runups recently. Maybe it is deserved, but they were much better buys in March when many were trading closer to book value.

[Mr. Sunshine] Wow....did not notice a post here until now. I bought a little NLY a few mont...

Mr. Sunshine — 7/9/2012 2:13:38 AM

Wow....did not notice a post here until now.

I bought a little NLY a few months ago and am thinking of buying more for my IRA. Not that knowledgable about mREITS, other than what I read on SEEKING ALPHA (which means i do not know much), and would like your thoughts.

thanks for posting Elroy!!!

[Elroy] Anybody still here? I've been trading the mREITs for about two years, and would...

Elroy — 6/20/2012 11:39:37 PM

Anybody still here? I've been trading the mREITs for about two years, and would love some discussion.