CHMI - Cherry Hill Mortgage Investment: Series A Preferred Shares Look Attractive

2024-07-02 12:43:25 ET

Summary

• Cherry Hill Mortgage Investment Corporation is an mREIT specializing in residential mortgage-backed securities.
• Q1 2024 preferred dividend coverage was superb at 5.2 times but the company will struggle if mortgage spreads or interest rates move higher as in recent years.
• The company is actively buying back its Series B preferred shares which offer a higher current yield but no capital gain potential.
• The Series A preferred shares offer a ~9% yield and potential for capital appreciation if interest rates decline as expected.
• Cherry Hill is exploring strategic alternatives to boost stockholder value, bringing uncertainty until a decision on the future is made.

Introduction

Cherry Hill Mortgage Investment Corporation's Series A 8.2% preferred shares ( CHMI.PR.A ) have performed in line with the iShares Preferred and Income Securities ETF ( PFF ) so far in 2024, posting a mid-single-digit total return:

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