PMT - Chimera Preferreds Yield Over 11% With Fundamentally Medium Risk
2024-07-01 10:58:56 ET
Summary
- CIM preferreds B and D offer high dividend income with yields over 11%, well covered by assets and cashflows.
- The unique fixed-to-floating structure resulted in high yields, now offering a favorable reward to risk ratio for investors.
- Fundamental analysis of CIM's underlying business shows stability for preferred dividends, making them an opportunistic investment opportunity.
Chimera Investment Corporation ( CIM ) preferreds B ( CIM.PR.B ) and D ( CIM.PR.D ) look quite appealing as a means of generating very high dividend income, as they have current yields in excess of 11% and are well covered by both assets and cashflows.
When fixed income instruments yield over 10% it is usually due to abnormally high risk, but the nature of the high yield here came about in a different fashion. These are supposed to yield 8% and I believe they have the risk level that would be appropriate for an 8% dividend preferred. However, due to the unique environment and the specific wording of these preferreds as they were issued, they are now yielding over 11%.
As such, I believe buying CIM preferreds today gets investors a highly favorable reward to risk ratio....
Chimera Preferreds Yield Over 11% With Fundamentally Medium Risk