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3 High Yield REITs with a Bullish Outlook

Shares of high yielding REITs have been relatively flat in August.  The Vanguard REIT ETF (VNQ), which tracks the performance of an index that measures the performance of publicly traded equity REITs, is up over 14 percent this year, nearly double the Dow Jones gain of 8 percent over the same period.  Investors have looked to mortgage REITs to take advantage of the recovering U.S. housing market. Mortgage REITs do not directly invest in real estate but invest in the mortgages on real estate properties.

While the housing market has gone from bad to less bad, these REITs have just declared higher dividends for their investors.  Each of these REITs has high dividend yields over 10% with a Bullish outlook.

Newcastle Investment Corp. (NYSE: NCT) announced that its Board of Directors has declared a quarterly dividend of $0.22 per common share for the third quarter of 2012, representing a 10% increase from the prior quarter’s dividend of $0.20per common share. The dividend is payable on October 31, 2012 to shareholders of record on October 1, 2012.  Newcastle has a current dividend yield of 10.3%.

Newcastle Investment announced that it has completed the sale of 100% of its interests in CDO X in connection with the liquidation and termination of CDO X.  Newcastle received $130 million for $89.75 million face amount of subordinated notes and all of its equity in CDO X.  The sale and resulting deconsolidation of CDO X from the Company’s balance sheet will eliminate the impact of CDO X’s negative net book value and generate an approximately $200 million gain for the third quarter.

Newcastle has an equity summary score of 8.7 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 1.7.  Newcastle has a 12-month price target of $8.75.

Newcastle Investment (operated as a REIT) focuses on investing in and actively managing opportunistic investments in real estate related assets. The Company primarily invests in two distinct areas: (1) Residential Servicing and Securities and (2) Commercial Real Estate Debt and Other Assets.

The Board of Directors of CreXus Investment Corp. (NYSE: CXS) declared the third quarter 2012 common stock cash dividend of $0.32 per common share.  This dividend is payable October 25, 2012 to common shareholders of record on October 1, 2012. The ex-dividend date is September 27, 2012.

This is an 18.5% increase from the prior dividend of $0.27.  CreXus Investment has a current dividend yield of 10.2%.  EPS is projected to increase 21% in 2013 and 18% in 2014.

CreXus has an equity summary score of 7.6 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 2.3.  CreXus has a 12-month price target of $12.50.

CreXus (operated as a REIT) acquires, manages and finances, directly or through its subsidiaries, commercial mortgage loans and other commercial real estate debt, commercial real property, commercial mortgage-backed securities and other commercial and residential real estate-related assets.

New York Mortgage Trust, Inc. (NYMT) announced that its Board of Directors declared a regular quarterly cash dividend of $0.27 per share on shares of its common stock for the quarter ending September 30, 2012. The dividend will be payable on October 25, 2012 to common stockholders of record as of September 28, 2012.  New York Mortgage has a current dividend yield of 14.5%.

New York Mortgage has completed an underwritten registered public offering of 10,000,000 shares of common stock at $6.73 per share.  New York Mortgage also granted the underwriters an option to purchase up to an additional 1,500,000 shares of common stock.  The proceeds will be used to purchase more assets.

New York Mortgage has an equity summary score of 9.0 out of 10 for a Bullish outlook.  First Call analysts’ consensus has a Buy rating of 2.0.  New York Mortgage has a 12-month price target of $8.25.

New York Mortgage invests in mortgage-related and financial assets and targets multi-family CMBS and Agency RMBS, including Agency RMBS consisting of adjustable-rate and hybrid adjustable-rate RMBS and Agency IOs consisting of interest only and inverse interest only RMBS that represent the right to the interest component of the cash flow from a pool of mortgage loans.

Best Performing High Yield Dividend Stocks in January 2012

The table below shows the best performing high yield dividend stocks for January 2012.  These are stocks with a dividend yield of 3% or higher and a summary equity score of very bullish (9.1 or greater on a 10 point scale).  These stocks are ranked by their price performance in the last 4 weeks, January 2012.   Here are some highlight notes from stocks making the top of the list.

Tessco Technologies (TESS) is highest with a dividend yield of 3.37% in the Electronic Equipment & Instruments industry .  TESS provides products and value-added services in the wireless communications industry.  The Company serves customers in the cellular telephone, personal communication system, paging, and mobile radio- dispatch markets.  TESSCO offers manufacturer brand name products, as well as its own products which are sold under the Wireless Solutions name.  In the past 52 weeks, shares of Tessco Technologies have traded between a low of $10.31 and a high of $17.25 and are now at $17.07, which is 66% above that low price.  Over the last five market days, the 200-day moving average (MA) has gone up 0.6% while the 50-day MA has advanced 1.2%.

Seagate Technology (STX) posted Dec-Q EPS of $1.28, vs. $0.31, beating our $1.02 estimate.  Sales rose 18% to $3.2B on a 24% increase in the average selling price  of hard disk drives due to the industry’s supply/demand imbalance. STX  signed long-term agreements with its major customers. As a result, we  believe hard disk prices will be more stable, but will remain at  slightly higher levels. We also project more cost synergy from the  acquisition of Samsung’s disk drive business. We raise our FY 12 (Jun.)  EPS estimate by $1.04 to $5.34, FY 13’s by $1.76 to $5.83, and our  target price by $8 to $32.

Shares of Cedar Fair (FUN) traded at a new 52-week high $26.31 on February 1 2012.  This new high was reached on approximately average trading volume as 214,000  shares traded hands, while the average 30-day volume is approximately 277,000  shares.  FUN has potential upside of 12.7% based on a current price of $26.18 and analysts’ consensus price target of $29.50.  Cedar Fair shares have support at the 50-day moving average (MA) of $22.82 and additional support at the 200-day MA of $20.44.  Cedar Fair, L.P. owns and operates amusement parks.  The Company’s parks operate under the Cedar Point, Knott’s Berry Farm, Dorney Park & Wildwater Kingdom, Valleyfair, and Worlds of Fun and Oceans of Fun names.  Cedar Fair’s parks are family-oriented theme parks that are located in various areas of the United States.

High yielding Real Estate Investment Trusts (REITs) such as Chimeria Investments (CIM) have performed well in the current economic climate. As reported in The Wall Street Journal, the MSCI U.S. REIT Index returned 8.7% in 2011, more than four times the return of the Standard & Poor’s 500-stock index. REITs are a popular play in the current economy due to their steady dividends. REITs can avoid corporate income tax, provided they invest in real estate-related assets and pay out at least 90 percent of their income in dividends to investors, rather than reinvesting in their business.

Citizens & Northern (CZNC) is one of today’s biggest movers, up 1.9% to $20.99 (January 24 2012).  The Dow is down 0.5% to 12,608 and the S&P is currently down 0.2% to 1,311.  In the past 52 weeks, shares of Citizens & Northern have traded between a low of $13.10 and a high of $21.00 and are now at $20.99, which is 60% above that low price.  Over the last five market days, the 200-day moving average (MA) has gone up 0.3% while the 50-day MA has advanced 1.3%.  Based on a current price of $20.99, Citizens & Northern is currently 16.6% above its average consensus analyst price target of $17.50.  The stock should find initial support at its 50-day moving average (MA) of $17.91 and further support at its 200-day MA of $16.20.  Citizens & Northern Corporation is a holding company for Citizens & Northern Bank and First State Bank.  The Banks provide a full range of banking services, including deposit and loan products for personal and commercial customers, and trust services and insurance products.  Citizens & Northern operates in north central Pennsylvania.

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Best Dividend Stocks for 2012 – Mortgage REITs

Attractive Returns to Continue, Prefer Non-Agency REITs

Prefer non-Agency: Heading into 2012 we think that the hybrid/non-Agency REITs generally offer more attractive value with the potential for more capital appreciation plus a more stable dividend outlook given the attractive reinvestment environment.

TWO remains top pick: Against this framework Two Harbors remains our top pick among the mortgage REITs.  The company has been opportunistically adding to its non-Agency position at incrementally accretive risk-adjusted yields.  This combined with the Agency portfolio with favorable prepayment characteristics gives us confidence in the sustainability of the current 16.8% yield.

Agency MBS: While the net interest spread opportunity in the Agency MBS space contracted during 2011 the returns remain attractive by historical standards.  In addition the reduced uncertainty around the prepay environment, specifically government actions, should make for a more predictable return path than in 2011.

Non-Agency MBS: In 2012 we continue to see the spread environment remaining attractive on a risk-adjusted basis with incremental spreads higher than the existing realized spreads.  It is more challenging to know how the securities will perform on a mark to market basis, which will be dependent on the broader
market risk appetite over the short-term.

Capital Raising: Given the attractive level of returns we see that the mortgage REITs will continue to have an appetite to raise additional capital.  The current gating factor is stock prices; current valuations would generally not allow the mortgage REITs to raise new stock at a price below book value.  We see the need for 6-7% premium in the group for offerings to become more likely.

Valuation: The relationship between price to book and ROE is less correlated today than it has been in the past as investors are putting a greater premium on safety versus returns.  This results in higher price to book multiples for the Agency REITs versus the broader group of hybrids.

The table below displays the mortgage REITs with the highest equity score (compellation of analyst opinions with 10 being Very Bullish).

Mortgage REITs for 2012, getrichinvestments.com

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