Another day, another uptick for Capstead Mortgage (CMO). As the macroeconomic news gets worse, this agency RMBS investor gets a boost from speculation that another federal funds rate cut is forthcoming. But has Capstead gotten ahead of itself?
The Company hasn't paid a double digit quarterly dividend since 2005, and even in the most recent quarter, Capstead only managed to earn net income available to common shareholders of $0.04/share, equal to its common stock dividend. Capstead doesn't release taxable income information, but agency RMBS investors tend to have fewer GAAP/tax adjustments than other mortgage REITs, so Capstead is probably paying out close to 100% of its taxable income. At June 30, 2007, book value was just $8.32/share, yet CMO was recently trading up at 4% to $11.40/share, a premium of 1.37x book value.
Capstead's dividend yield is significantly lagging its peers, and its investments are primarily floating-rate securities -- meaning that the upside from falling interest rates is effectively capped.
Capstead reports third quarter results on Friday and plans to declare the fourth quarter dividend in early December. We'll see if Capstead was able to effectively deploy its recent capital raise and improve net interest margins.
3 comments:
is there a capstead in NC?
I'm not aware of one. Capstead Mortgage is based in Dallas, Texas. Thanks for reading the blog.
whats you beef with Capstead ? Are you a paid basher,short, got fired or what ?
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