Winners of the week
Last week, ended December 18, 2015, the iShares Mortgage Real Estate Capped ETF (REM) returned 4%. Resource Capital (RSO) and New Residential Investment (NRZ) were the top performers for the fund. RSO ended the week with positive returns of 26.8%, whereas, NRZ ended the week with returns of 12.6%. The other securities that gained were Two Harbors Investment (TWO) and Annaly Capital Management (NLY). The two generated positive returns of 4.6% and 2.9%, respectively. Chimera Investment (CIM), part of the mortgage REITs sub-group under the iShares US Real Estate ETF (IYR), was part of the top gainers. CIM returned 6.3% for the week.
The graph above represents the quarterly dividends declared by Residential Capital.
Dividend announcement led to surge
Resource Capital (RSO) rose 26.8% in the past week and 16% over the last four weeks. The company announced its quarterly cash dividend for its preferred stock. It will pay a cash dividend on its 8.5% Series A cumulative redeemable preferred stock, its 8.25% Series B cumulative redeemable preferred stock, and its 8.63% Series C cumulative redeemable preferred stock for the period from October 31, 2015. On December 14, 2015, the company also declared a cash dividend of $0.42 per common share for the quarter ending December 31, 2015. The company shared its outlook for the year 2016 as follows:
- projected GAAP (generally accepted accounting principles) net income of $1.6 to $1.8 per common share
- AFFO (adjusted funds from operations) of at least $2.65 per common share, representing 1.57 times coverage of the dividend declared
- the projected AFFO represents a 14.7% return on book value and a 26.1% return on the current market price of $10.15