This quick note is to add a page for discussion for “flipping” issues and for “dividend capture” techniques.
We all discuss these types of things all the time so it is way past time to add a area for discussion for of techniques you use for “flipping” (a quick hold and resale for profit-or occasionally a loss) and for “dividend capture”–buying with the intent to secure a dividend and probably sell shortly there after.
I’m realizing that I don’t fully understand what happens when a preferred stock is called for redemption at a time other than a standard payment date. To use an example that has come up here, let’s talk about WCC-A. It typically pays on LD 3,6,9,12, but the reset date and first call are 6/22/25. From the prospectus, it seems like the company is required to notify holders about a potential call with 30 to 60 days advance notice.
Assume first that they announce a call for 6/22/25. Would they also declare a new ex-div date, such that you have to buy before this date to receive the final partial dividend? Or does that final partial dividend go to whoever is holding the stock on the last day, regardless of how long they have held it?
Next, let’s assume they announce a call for 6/30/25, which coincides with their regular payment date. I presume that in this case, the usual ex-div date applies and the final dividend goes to whoever was holding the stock the day before the ex-div?
But how much would that final dividend be? Would it be slightly higher than normal because the last week is being paid at the new higher rate? Or is the full period at the initial rate, and the higher reset rate only applies once the new payment period begins? I’m not confident in my intepretation of the prospectus.
I should probably add that I’m not actually holding WCC-A at this point. I’m using this as a complicated test case for my new spreadsheet approach, and just want to make sure I can handle odd cases like this acceptably.
When I just had Ang-a called last month a week before the payment date, they didn’t have an ex-date. They just prorated the normal dividend rate and paid it to whomever held at redemption. Prif-g was similar I believe.
I’ve seen it work both ways
As to the other question, in my experience, the new rate for floating issues begins only with the new dividend period, without exception.
NK – I deal with it by not dealing with it. I always sell 1 to 5 days before the call date (or maturity date) because sometimes it takes days or weeks for companies to pay the dividend and the par value. If I don’t have another investment for the funds, then I put it in MM at about 4.25%, which gives me nearly as much as the final pennies in divs from the stock if the hold time is included. Depending on the amount of time the company takes to pay back the par value, MM could be a much better investment.
For example, there is 18 days between the ex div date and the payment date for RITM-A. They did a partial call on March 6, but I still haven’t received anything. The next time any company announces a partial call on any of my perferreds, I’ll research the call date and the payment date, and I’ll consider selling my entire holding before the call date.
NEW YORK–(BUSINESS WIRE)– Rithm Capital Corp. (NYSE: RITM; “ Rithm Capital ” or the “ Company ”) announced today that it will redeem $50,000,000, or 2,000,000 shares, of the Company’s outstanding 6,210,000 shares of 7.50% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “ Series A Shares ”) at a redemption price equal to $25.00 per Series A Share in cash, plus $0.274091 per Series A Share of accumulated and unpaid distributions thereon to, but not including, the redemption date of MARCH 28, 2025 (the “ Redemption ”). The Series A Shares trade under the ticker symbol “RITM PR A.”
Thanks, 2WR. Goodbye RITM-A, and thanks for all the fish (dinners).
MITT-A/b CIM-A/b/c MFA-A/b all ex-div friday or early the following week. They are not priced well compared to the newer baby bonds except for CIM-B. Maybe play for the ex-div flip but I’d rather be in others for a keeper MITN MITP CIMO MFAO.
I wrote a response on the “Reader Alerts” thread about calculating stripped prices for preferred and baby bonds that trade “dirty”, but that’s probably not the right place to have the discussion. I thought about putting it on “Sandbox”, but it’s hard to have an extended discussion there as things fall quickly off the front page due to the fast pace. So I chose this slow moving thread because it doesn’t get a lot of posts, and because properly calculating stripped prices is crucial to dividend capture.
My question is “What’s the right way to calculate stripped price?” Or given that stripped price is often defined as market price minus accrued, “How do you calculate accrued dividend or interest?” For a bond that trades “clean”, it’s fairly straightforward: figure out how many days have elapsed since the last dividend payment, multiply by the interest rate, and that’s the accrued interest that is paid from the buyer to the seller.
But if you apply this same logic to a stock with an ex-div date, you get some silly answers. In my mind, the main purpose of calculating accrued interest and stripped price is to compare the value of a preferred/BB is worth at different points in the quarter, especially just before and after the ex-dividend date. If the formula used doesn’t correctly predict the predictable drop on the ex-div date, it’s not a very good formula to use in practice.
So what’t the right way to do it? Is there a formula that shows a smooth stripped price across the ex-div date and (ideally) also correctly predicts the observed amount of drop on the ex-div?
Nathan, I understand why people want to keep track of this if they are looking at a term preferred or one stock that is getting called or like on this page for flipping and dividend catching. But calculating how much to expect a stock is going to drop and recover or continue dropping is difficult. Depending on how much demand it can recover quickly or if no demand can continue to fall. On top of this the next dividend is 3 months away. So you need a reason to hold. If you’re just dividend harvesting you need to act quickly or you can lose any profit you made.
In the past, if the market was more steady I would just look at the chart and gauge the lows and highs and knowing the dividend I would buy close to the low and estimate the profit and just accept that and sell near the high and not worry about the dividend.
But with this market I don’t want to be playing that game right now.
Nathan-
When deciding when and at what price to buy, I look at the chart, subtract the dividend and see where that lands. I look back to see how price has behaved between previous dividends. It matters if price is trending or cycling. Calculating stripped price seems like a waste of time except in those instances when you want to pick up pennies before a maturity/call.
R2S, thanks for cleaning up my post. You seem to do pretty much what I do when I look to buy for the dividend.
No complex formula I just deduct the accumulated dividend which is the payment amount pro-rated by the number of days since the pay date. Quick estimate in my head, or whip out the pocket calculator if I want to be precise. Ex-div date only determines who gets paid so that’s when the price drops but the dividend accumulates from the pay date.
I appreciate the responses so far. I’d have to agree that it’s probably healthier to invest in safe companies with decent returns and not always worry about making a few extra pennies.
On the other hand, I don’t understand the idea that it doesn’t matter who gets the dividend. If you are calculating the stripped price based on payment dates and ignoring ex-div dates, it seems like you would be fooled into thinking some things are bargains when they are not.
To make it more concrete, maybe we can look at a couple real examples. In another thread, there was a comparison of RCB and RCD. Both are baby bonds from the same company, but it can be tricky to compare their value because they have different payment schedules.
RCB is a 6.2% coupon selling for 24.10 with a 7/30/26 maturity. RCD is a 9.0% selling for 25.24 with a 12/15/29 maturity. Which is currently a better buy, and why? How do you calculate this? And would you expect to get the same answer after RCD goes ex-div on March 1?
Nathan,
re: Using different methods to calculate is one solution, but comes with obvious downsides. My current goal is to figure out a single formula I can use in Google Sheets that comes closest to approximating the actual IRR.
My reply -> if anyone knows of such a formula, I look forward to seeing it.
re: I’m currently calculating stripped price based on the last ex-div date. But as you point out, this causes increasingly large errors as you get close to call or maturity. My “homebrew” fix for this is to compensate by calculating the percentage of the remaining time that is after the last ex-div date, and then using this to artificially lower the coupon rate I put into the YIELD function.
My reply -> When I picture what this homebrew fix is, it’s still somewhat of a fuzzy picture (e.g., remaining time to next interest payment? to maturity?) so all I can say is if you get accurate yields with it, great.
Re: “… the idea that it doesn’t matter who gets the dividend …” when using pay dates and “fools us into thinking some things are bargains when they are not.”
My reply -> I’ll take a stab at this (I hope I understand what you meant).
Using the “payment dates” doesn’t create fake bargains.
My google sheets formula uses 3 dates in calculating the stripped price and how much of the next div has accumulated — today, the prior ex-date and the next ex-date. INBKZ is a good example. Today (Feb 17) is in between the ex and pay dates. (So to me, it’s a better example than RCB and RCD)
INBKZ:
Ex date 2/14/2025; pay date 3/30/2025
Earliest call date (callable on pay dates only) = 3/30/2025
Assumed coupon of next interest payment = 8.699%
25.15 clean price.
(1) Using the ex-date method:
4 days have accrued into the next interest payment
Stripped price = 25.13, stripped yield = 8.55%, YTC = 4.21%
(2) Using the pay-date method:
Under this method, when we’re between the ex- and pay dates, “today” is before the “prior” ex date, so the accumulated div becomes a negative amount. Thus, the stripped price is higher than the clean price. This of course lowers the yields compared to the yields we get from the ex-date method.
Stripped price = 25.39 (higher than 25.15 clean price),
Stripped yield = 8.26%, and YTC = -4.41%
Comparing the two sets of yields, INBKZ looks more attractive from the ex-date method. Higher yields. But if I bought it and they called it on 3/30/25, I’d actually lose money (YTC -4.41%). In these nearing call/maturity cases, it’s actually the “ex-date” method that could make something appear a bargain (+8.55% SY, +4.21% YTC) when it’s actually not (+8.26% SY, -4.41%).
re RCB v RCD:
If we’re ignoring other factors (i.e., company risk and duration risk) and just seeing which of RCB and RCD is a better buy by comparing yields:
1) since RCB is callable now and matures relatively soon (less than 18 months), I use the “pay date” method since it gives me the accurate yield to maturity and YTC.
2) since RCD has much longer to it’s 1st call date and to when it matures, I use the “ex-date” method.
I know I’m compare them using yields calculated differently for one than the other, and I know therefore that calculating them both the same way will change the yields for one of them (and that could change the result of which one looks like the better buy). In that case I look at the other factors, like how much more duration risk I’d have by holding RCD with it’s almost 3.5 more years to maturity than RCB.
I know this may not help you because it’s not giving you the solution for a standard formula that fits in all situations. For me, this is the best I know how to do at this point.
Nathan, I think you are going to have to look inward for some answers. For the sake of argument, let’s say RCB and RCD have a similar yield.. in this instance, I will take RCB all day long, preferring the smaller time to realize the return. Btw, this is the general logic for investing in credits… longer maturity issues come with higher spreads.
Currently, the YTM on RCD would have to be about 1.2% for me to prefer it over RCB.
And this rational would change with each credit and situation. For instance, the South Jersey 2031 is offered at 8.4% YTM, which I deem as very attractive for their credit risk.. in those situations, I want to lock in that yield for as long as possible, hence I would choose the longer maturity south Jersey bond if a shorter maturity one was offered w the same yield. Note: a shorter maturity doesn’t exist, just created it for illustrative purposes.
Answering @2whiteroses from the Reader Alert’s thread (https://innovativeincomeinvestor.com/reader-initiated-alerts/comment-page-9/#comment-148017):
How would you suggest calculating the stripped price for an issue that is between the ex-div and the payment date?
In the this thread @mbg gives the excellent example of INBKZ. When I put it into the Fidelity calculator you suggest, it tells me that it has 29.5 cents of accrued. But that’s money that’s going to someone else! If I simply subtract that from the market price to find the stripped price as I think you are saying, I get what I think is an artificially low price (and hence an artificially high return), since the price has already dropped on the ex-div.
@mbg’s solution is to add the accrued to the market price in this timeframe instead of subtracting, and while that’s arguable closer to the right answer for calculating yield to worst, I think it might be misleading in the opposite direction for yield to maturity. But this is what I mean when I say that it just puts all the weight on the question of how to calculate the stripped price.
@mbg and @Maine: Great posts, and I need to think more before I respond.
Nathan,
re your comment: “mbg’s solution is to add the accrued to the market price in this timeframe instead of subtracting, and while that’s arguably closer to the right answer for calculating yield to worst, I think it might be misleading in the opposite direction for yield to maturity. But this is what I mean when I say that it just puts all the weight on the question of how to calculate the stripped price.”
mbg’s response: I think this way (adding the accrued to the market price) gives an accurate YTM.
Assume we buy INBKZ today and hold it to 6/30/2029 maturity.
Remember that we buy it today BUT the first quarterly interest payment we’re entitled to only begins accruing on March 30. So buy it today means we hold shares for almost 6 weeks before our first payment starts accruing. We hold it for ~ 4 1/2 months for that 3-month interest payment.
YTM is an “annualized” yield, so for someone who buys INBKZ, holds for exactly 1 year, collects 4 interest payments, and sells it for no gain/loss, their yield = the 8.699% coupon. If that was us who did this, we’d have held it for 1 year + 6 weeks. For us, the yield < the 8.699% annual coupon.
I think this applies for holding it to maturity as well. The added 6 weeks of holding before we begin accruing interest on our shares takes down the YTM.
Anyone who sees a flaw in my explanation, please let us know.
OK, Nat, I’m not saying with 100% confidence this is the proper way to do this, but if you want to figure accurate YTM on INBKZ 8.699% (ignoring that it will change quarterly) due 6/30/29 bot @ 25.15 on 2/17 here’s what I think should be done if using the calculator – this is an example of having to know the nuances of the calculator to use it properly to handle special situations –
You know how we SUBTRACT the accrued in normal circumstances to take into account that baby bonds (term used generically) trade flat (aka clean)? Well, in a case like this you of course first IGNORE the calculated accrued because you are not entitled to it… However next you should ADD a theoretical amount of accrued to take into account what the calculator knows nothing about – that you’re not entitled to accrued until 3/30…. It thinks you are accruing daily so that’s a benefit you DO NOT GET. So theoretically, you should calculate the daily amount of accrued from settlement day 2/18 to 3/30, which in this case would be .006041/day based on 360 day year…. Here you have to estimate the right amount of days between settlement day and 3/30. Being off a day is not going to materially alter your results, but let’s assume it’s 42 days. That totals 25.372 cents that needs to be ADDED to 25.15 to figure an accurate YTM. So you calculate for a price at 25.40372 with no accrued. So accurate YTM using the calculator in this special situation (one we must always be aware of when calculating), should be 8.253%.
Understand, I’ve never been told this is how to do this nor do I know with any certainty that it’s correct…. However, it seems like an obvious extension of the same math you use when under normal circumstances you SUBTRACT accrued you’re entitled to because the calculator by default assumes you’re not…. This is the exact same but exactly the opposite situation from the calculator’s point of view.
I used an HP 12-c. For speeds sake, I converted to monthly
first issue – i figured you get 6 payments = 1.5 years – just for example so I maybe off by a month or so:
PV -24.10 (use change sign)
FV = 25
PMT = 1.55/12 or .129167
N= 1.5 (g) or 18 months
solve for i – 8.77% (.730839 x 12)
So a quick check – the YOC is 6.43% and the increase at payout is 3.73% over holding period of appx 1.5 years or 2.49% per year increase or 8.92% (6.43% + 2.49%).
so appx 8.8%
Second Issue:
PV -25.14 (use change sign)
FV = 25
N = 4 years and 3 months so 51 month or 2.25(g)
PMT = 2.25/12 or .1875
Solve for i = (.727402 x 12) = 8.73%
Quick dbl check YOC is 8.9% and you lose .95% over 4.25 years or -.22 per year so 8.68%.
So appx 8.7%.
First issue has higher YTM depending upon your outlook for IR/yields, duration risk, credit risk and desired holding period. Basically a subjective call. YOU can dial it in by using exacts months and research remaining payouts (quarterly vs monthly).
QQQ – I’ve owned a 12c literally for decades… In fact I still have the 200 page manual that comes with that little gem… I’m not questioning your method, in fact haven’t even looked into it, but I know my manual (edition 4 dated 2004) covers Bonds directly in Section 16 starting on p 63….. Have you looked into the methods they spell out? For all I know, what you’re doing might be even necessary to attempt to calculate yields on a bond that’s not $!00 par, but I was just wondering how your results might compare if you utilized the method they outline in their Bond Calculation section 16…. FWIW, it’s also been decades since I’ve used the 12c for anything more than a simple calculator with its particularly helpful quirks for use in multiple sequence calcs…so Ive essentially forgotten how to use practically all the goodies it can do….
I feel like I’m making progress, although I’m still deep in the weeds. I spent last night making some spreadsheets using XIRR and XNPV to establish some “ground truths” for valuations of a hypothetical preferred stock for every day within a year.
I set the exact payment schedule for a “stock” with a 1 year maturity, then calculate the exact return for purchase at a particular price, and then calculate the price adjustment necessary to obtain some other specific rate of return. The next part of the plan is to try different methods for calculating YTM to see which one best matches the exact answer.
I’m still lost, but the approach seems promising. My preliminary conclusion is that while you can do the price adjustments based around the payment date if you want, the math is easier if you concentrate on the ex-dividend dates. And rather than thinking about it as a “stripped price” and arguing about when dividend accrual starts, it’s probably better to talk about just an “adjusted price” without worrying about what has technically been accrued.
I’ll try to keep working on it on over the next few days and report back. Thanks for the suggestions so far.
The testing has been useful, but discouraging. At this point my conclusion (with about 90% confidence) is that there is no practical way to use the YIELD function to calculate exact YTM for preferred stocks. You can cobble something together that mostly works for most cases, but there will always be times where it’s off.
The problem is that it’s “hard-coded” to make it easy to work with traditional bonds that “trade clean”. It’s documented poorly, but the input price for a stock that “trades dirty” needs to account for the accrued interest/dividend. So far, so good, we can try to make that adjustment.
But the problem is that you don’t need to adjust for just the amount actually accrued, also need to predict exactly what amount of accrued the function thinks the “bond” will have. As best as I can tell, the first thing that YIELD does internally is to add back the accrued that it thinks you will need to pay the seller. And then it uses this as the basis price for the yield!
Making it worse, the internal formula it uses has no concept that the ex-dividend date is earlier than the payment date. Depending on how you make the adjustment, it might be crediting you with an extra coupon you don’t receive, or it’s counting interest after the last ex-div date that doesn ‘t exist.
As the final nail in the coffin, its internal method of calculating accrued only works for annual, semi-annual, and quarterly payments. So if you are trying to adjust an issue that pays monthly, there is no possible way that you can make an accurate adjustment. Either you provide the adjustment that cancels the actual accrued or the accrued the formula thinks it has, but either way the answer is wrong.
The good news is that it’s possible to kludge something together that generally gets answers within .2% or so as long as you aren’t calculating events very close to maturity or call. The bad news within the good news is that “very close” is poorly defined, and that the error can blow up when you cross the invisible line. Blech!
So at this point I’m trying to figure out what other options exist for calculating a true YTM. The XIRR function takes the exact dates and amounts of payment as input and always returns an exact answer, but it’s tricky to use programmatically.
Normally you have to actually enter all the payment dates until maturity for each stock, which can work for a single stock but is cumbersome for a long list. My plan at this point is to try to figure out an efficient way of using XIRR to calculate an exact answer without needing to do all this data entry.
I can give more details if anyone is interested, otherwise I’ll probably go silent until I have something that works.
I appreciate all the work you’ve been doing…. Personally, being the dinosaur that I am, I don’t have or don’t care to have the spreadsheet capability to try to use anything generating XIRR or whatever… It is true, the calculator does default to standard bond math, but imho, if you know or figure out how to put in correct input, you can generate the right output….. Only real comment is that you’re not right – it does offer monthly pay option along with annual, semi-annual and quarterly. To me, imho doing all the data entry for every single issue you’re going to be interested in sounds like a nightmare so I sure understand you’re wanting to figure a workaround to that.
Thanks! I probably said it in a confusing way, but when I said there was no easy option for monthly payers I was referring only to the YIELD function in Excel and Google Sheets. Almost all of the financial functions in those two accept only annual, semi-annual, and quarterly.
I did notice that the Fidelity calculator has a monthly option. Definitely it can be a very useful tool if you know how to use it, although I suspect that some of the other “gotchas” are still there. I’m hoping that once I get an exact formula I have some confidence in we can do some comparisons.
Good luck, Nathan… I’m open for comparisons, but here’s a suggestion – once you’re ready to compare, go to any site like Fidelity where you can randomly select and 1k bond you see and they’ll spit out a YTM at the given bid price and also the asked price….. Throw one of those into your formula and see if you match the yields Fido is showing for either the price or the yield shown. If you match, then to my eyes you’re golden because then your formula will allow you to fairly compare the yields you come up with in the exact same way as most every printed yield you’ll see from online brokers….
Nathan what I have found is for calls or maturities farther out, say 18 months, the XIRR based on dirty purchase price is pretty close to what YIELD calculates with a clean price. As the date gets closer and especially 6 months or less the native compounding and annualization pretty much makes the XIRR Calc useless for me. So I will use the same dates and amounts as in the XIRR cal but instead use a simple interest yield Calc similar to what Tim laid out recently regarding WCC-A (Maximum dividends $1.33 then you will lose 90 cents on the redemption (from 25.90 now), There are 2 dividends ahead–March and June. Looks to me like I am pretty close?). I am less concerned with the academic YTC/YTM calcs honestly because I don’t automatically reinvest the int/div and the compounded reinvestment return doesn’t help me decide where to best allocate that income. In the end I want to know how much I’m going to make with real money. So in the case of WCC-A if I buy today I make a bit less than 2% with about a 3 1/2 month hold. I then decide what I’d like to do.
Ex-div Friday that I loaded up on.
CIMO MFAO MITN MITP
RITM-B RITM-D
Probably keep much of it, hope to flip some in the dividend capture and on to the next thing.
I poured spare cash into CKNQP when call was announced yet it still traded up to 8% APY to call. Maybe flip early. Sure enough today ex-div day I cashed out for a better return. Smallish number for a short amount of time but much better than sitting in cash. Looking for more such opportunities to squeeze out more nickels.
Trade alert! do not follow this crazy cat person! SUM just announced it agreed to be acquired by Quikrete a private manufacturer of concrete products for $52.50 cash. Currently trading below 51.00 may be a good place to position for trading as the deal closes or hold until close.
I love the ambulance chasers. FIDO just posted that 20 minutes ago a law group announced it is “investigating” the sale. Two years ago I played M & A and anytime Yahoo Finance posted news on a law firm investigating I followed up to see which other stocks they were investigating. Now it’s easier to look just look on SA ( duh)
Speaking of flipping and dividend capture, Old fart just mentioned on Reader Alerts METCL Not that I am recommending it, but those who want to know about dividend flipping I suggest you look at the chart of this BB.
I have no dog in this fight, DYODD Red flag alert, look at the volume.
METCL has bounced around this year. $1 from low to high. Drops after ex dividend date then moves back up. Pays 9%, $0.5625 per quarter. I do own some and might buy more but the price would have to be lower than the current 25.54.
NYMTI now trading below stripped par. Maybe the parent company is risky but their other preferreds are going up in price while not as good.. A head scratcher, I already bought too much thinking it was a mispriced bargain that would soon rebound.
Martin- check out MITN. It trades below par when factoring in the ex div, better credit/team and higher coupon.
I have plenty of MITN and MITP, curious that their fixed rate perpetuals actually pay less. MITT considered above average risk but better than it once was. Hoping to trade between them but there hasn’t been enough price variance lately, so I’ll settle for 9.5% now.
I sold 2k shares of EICC (8% due 4/30/29, call 4/30/26) today at $25.19 and flipped it into 2k share of EICB (7.75% due 7/31/28, call 7/31/25) for $24.91. I’ll take the 27 cents given its in the IRA so no taxes due.
I’m probably the only one in on this… but this has continued to be here almost every trading day. I’ve probably flipped over 6k shares. I just can’t figure out why there’s a consistent buyer for one and seller for the other. As long as I can net 20 cents or so, I’m going to keep doing it. It goes ex on the 11th so it’ll probably stop then.
mrinprophet, thank you for the head’s up.
This has been a wild two weeks. I started with the trade above and kept going. For me, these were in size (k’s of shares) with cash from sales being used to buy new securities. Here’s a summary with average prices.
Sold EICC @ 25.18
Bought EICB @ 24.94
Captured $.1615 dividend
Sold EICB @ 24.90
Bought EGLPV @ 24.73
EGLPV converts to EIIIA, Sold EIIA today @ 25.04
Bought EICC @ 25.01
This is the first time that I’ve really tried to “trade” preferreds for short term gains.
I’ve been trading between EICB and EICC. The gains are penny ante but they are reliable it trades within narrow predictable variance. Do it enough times and your 8% yield becomes 12 to 15% profit maybe more. Time consuming strategy if that’s it but I’m in there looking at 50 other things too so no bother
Long both. Like the monthly payout. Will move if yield drops below 7.5%.
ACR-C trading at $25.12 paying a $0.70 dividend with ex date 10/1. currently floating at L+593 (or L equivalent)
AGNCO $25.42 will floating 10/15 at essentially same rate as AGNCN which is trading at $25.83. Both go ex-div 9/30
I have some AGNCO will try to cash out on ex-div day if I get a good fill the price seems topped out.
Also have a moderate position in ACR-C for the div capture or to hold, not one of my top REITs but I spread my REIT money out somewhat. The floor on dividends reduces the risk of large rate drops.
ACR common suspended div after 2019, can’t trust that they won’t cut out Pfd div at any time without notice. AGNC Pfd have yields too low for me.
George, several of the AGNC preferred are already floating and returning over 9% yield. My concern is AGNC hasn’t called any of their preferred since 2019 As a matter of fact, they all are technically perpetual. The AGNCN has been floating since 10-15-2022
I have a hard time investing in something I don’t understand. Even if they invest in mortgage backed securities guaranteed by the US government how do you buy mortgage loans paying 4 to 6% and pay out 9 to 10% on your preferred?
While true, that was under different management and the ACR common remains suspended. The new management reinstated (and paid) all ACR-C accrued dividends deferred by the prior managment.
No current indications IMO that ACR-C or ACR-D at significant risk of dividend deferral.
ACR prefs are also heavily owned by Eagle Point…Not saying you should blindly follow Eagle Point, but it’s a positive touch as they are a credit savvy shop when it comes to lending to lenders… Eagle is actually winding down their ACR pref position now that they have rallied so much.
Maine, you had me sitting up for a second on Eagle. You know of any more lenders Eagle is loaning to, especially in the MREIT space?
Charles, I don’t know of any other in the mREIT space, but I wouldn’t be surprised if they held some in accounts which don’t have to report, or direct loans. Here is the latest for their public disclosures:
https://www.sec.gov/edgar/search/#/ciks=0001607203&entityName=Eagle%2520Point%2520Credit%2520Management%2520LLC%2520(CIK%25200001607203)
Interesting Maine, They are holding 10% of some OFS which is having problems with non accrual on loans and coverage of their dividends and they also are involved with OXLC BB and preferred. I don’t own either company’s notes or preferred directly. Didn’t know I owned them indirectly through Eagle!
MFAO priced lower than MFAN despite having a slightly higher yield and otherwise nearly identical. Good time to swap if you have MFAN and care about smallish but reliable swaps. Though it’s tempting to just sell if it gets enough above par the YTM is too low. Term issues don’t do volatility as well as perpetuals.
Martin. The mREIT BB have been bid up quickly!
RWTO/N offer the best value now near $25, IMO.
BTW, check out CHMI-B for a Div capture flip. 70 cent divvy goes ex on 9/30. Yes, it has a low pref/equity ratio but it’s agency and the spread is a healthy 5.9%. They have also been buying back the prefs.
I have RWT-A for the div capture or to hold, the 1+% difference in lower yielding baby bonds is too much for me to justify. Actually sold some A early on the price runup since I bought it last week. CHMI is not one of the better REITs I bought some CHMI-B for the div capture but don’t want to hold it long term there are better choices for that.
Marty, Long both MFAO and MFAN as wellas RWTN and RWTO. Got them both relatively low priced when issued, so I am in SWAN mode.
Bought PNFPP yesterday at 7% on cost. Getting too many bank issues so this may be a flip. This is a small Tennessee bank that was showing improvement but last qtr. report was off. If I hold there is a good chance it gets called 9/25
Here’s a trading idea that was recently posted on SA.
RILYM is trading around $20 and will mature in Feb. @ $25 with 80% being redeemed in November per a covenant agreement. If you bought 100 shares now @ $20 and 80 shares get redeemed in Nov. @$25, you would essentially have a basis of $0 in the remaining 20 shares.
I bought NYMTI for the dividend capture but it went up so much I sold it early. Take the money and run. Several baby bonds gpoing up t9oday on expected rate drops but they are 5 year issues too much extra price reduces YTM more than some realize if only paying attention to dividends.Also selling CIMO and buying CIMN 50+ cent difference should be 25 at the most.
TWO-A and TWO-B now at the same price. May be a good time to swap if you are in B.
Dividend captures I’m playing for next week.
MBINO 30 cents below stripped par and floats at a high rate next,
NYMTI paying it’s first dividend and running almost as much below stripped par.
MBNKP which may be a keeper.
ICR-A HFRO-A ATH-D though I don’t necessarily recommend holding them just playing the game.
SCCE and their brothers were there but I took my small gain already.
TDS-U/V is there too but I’m not in.
I appreciate you regularly sharing these. MBNKP is interesting. Will float soon at a very nice rate but there is a group trying to get BOD seats and they raised performance and governance issues. Not really relevant for a flip, but might not be a keeper, unless of course the activist wins.
ZimCal disturbed by Medallion Financial’s second quarter results
15:31:00 PM ET, 08/20/2024 – GlobeNewswire
2Q24 results show worrying trends that must be addressed immediately.
Core charge-offs (YoY), ROAA, ROAE and holding company cash-burn trended poorly.
Quarterly earnings, ROAA and core ROAA (Ex. Taxi Medallion) are at 3-year lows.
Low Price/Tangible Book Value multiple may be an indication of market skepticism despite Russell 3000 inclusion.
ZimCal believes that Medallion Financial Corp. has tremendous upside with the right governance and leadership.
ZimCal previously provided MFIN with a version of its “5 Steps to Improvement” plan https://static1.squarespace.com/static/660d933ebd099f4347f44cc3/t/66c673529c161a2b2fd1dde0/1724281683647/5+Step+Plan+-+White+Paper.v4.pdf
ABR-D has been cheaper than ABR-E lately even though it pays more and otherwise the same thing. Good swap for those who do such things. Then I’ll trade back when the prices correct themselves. Double the return when the market is inefficient enough.
MFAN first dividend 73 cent div capture next week I’m all in don’t prove me wrong. MITN and MITO below stripped par higher div for somewhat more risk also first ex-div Aug 1st. Other newbie baby bonds such as NYMTI slightly below stripped par. I’m not sure how to play this new breed of BB’s I’m more familiar with perpetuals. Dividend rates have become very close but the perps have price upside and more volatility for whatever that’s worth.
MFAO has the first dividend of 73 cent.
Correct. They all run together in my brain after awhile.
End of quarter is a busy time for dividend captures. Next week offers NYMT AGFNC CHMI EFC ACR GPMT XOMA DX RWT preferred issues, among others. Flip them and buy early April ex-div ABR RITM TWO DBRG CIO NREF.
Dividend captures weren’t as profitable last year with the rising rates. Hopefully the tide is turning. I’ve had a few good ones lately but offset by one loser.
Roche (RHHBY) is a very high quality pharmaceutical company. Like many European companies it pays an annual dividend. They will pay it in just a few weeks- if anyone is interested. I added to my position this morning.
The issuers of TPTA and TFSA merged in 2022. Does anyone know why these two baby bonds, with similar terms, trade at a wildly different YTM?
LANDP available at around $1 cheaper for anyone who holds the O. Good swapping opportunity.
Interesting BB14
It has a lower float
Where did you see that it floats?
Martin, that is not the float you are thinking of. This version of “float” refers to shares outstanding in a particular issue, not a floating rate as you are thinking of.
My head is spinning. How does it make that much difference?
Im not suggesting it is or it isnt as I have seen it work both ways. I was only explaining what he meant by “float” so you knew that it meant shares outstanding not a floating rate issue.
It makes a difference because of supply and demand… it’s why one ran ahead of the other…..
I traded between LANDP and LANDO a couple times for a couple nickels. Thought I had a good thing going. But O has been higher for some time. I guess I’ll have to settle for 8% divvy and some upside.
Lpoading up on ABR TWO RITM preferreds or ex div this week. Dividend capture strategy was not quite as effective during the rate increase price drops. Now might be the time to get back in the game.
Martin, the CODI pfds go ex- tomorrow.
If interested, huge dump on CODI-B.
bid ask = 24.48/24.51. Down 2.4% on the day.
CODI-C (same coupon as -B) bid/ask = 25.00 / 25.27
-B floats in April 2028. -C is a perp.
Thanks for the heads up I bought some. Waiting for the bounceback.
You got it. Me too – waiting for the rebound.
I bot some in the low 24.50s. With the 24.22 bid, it’s already worked as a div capture, but since it appears to have just been a dump, and today with CODI-C still much higher than -B, a rebound coming soon seems reasonable.