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ABR Arbor Realty Trust, Inc. Announces Proposed Private Offering of Convertible Senior Notes due 2021
8:15 am ET July 17, 2018 (Globe Newswire) Print
Arbor Realty Trust, Inc. (the "Company") (NYSE:ABR) today announced that it intends to offer, subject to market and other conditions, $110 million in aggregate principal amount of Convertible Senior Notes due 2021 (the "Notes") in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act). The Company also intends to grant the initial purchasers of the Notes a 30-day option to purchase up to an additional $16.5 million aggregate principal amount of Notes on the same terms and conditions.
The terms of the Notes, including the interest rate, initial conversion rate and other terms, will be determined by negotiations between the Company and the initial purchasers of the Notes.
The Company intends to use a portion of the net proceeds to enter into privately negotiated agreements with certain holders of its outstanding 5.375% Convertible Senior Notes due 2020 (the "5.375% Convertible Notes") to exchange their 5.375% Convertible Notes for a combination of cash and shares of the Company's common stock. The remaining net proceeds will be used for general corporate purposes.
This offering is being made to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The offer and sale of the Notes and the shares of the Company's common stock, if any, issuable upon conversion of the Notes have not been and will not be registered under the Securities Act or any state securities laws, and, unless so registered, the Notes and such shares may not be offered or sold in the United States or to U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall it constitute an offer, or the solicitation of any sale, of any securities in any jurisdiction in which such offer, solicitation or sale is unlawful.
About Arbor Realty Trust, Inc.
Arbor Realty Trust, Inc. (NYSE:ABR) is a real estate investment trust and national direct lender specializing in loan origination and servicing for multifamily, seniors housing, healthcare and other diverse commercial real estate assets. Arbor is a Fannie Mae DUS(R) Multifamily Lender and a Fannie Mae Small Loan lender, a Freddie Mac Seller/Servicer and a Freddie Mac Small Balance Loan Lender, a Fannie Mae and Freddie Mac Seniors Housing Lender, an FHA Multifamily Accelerated Processing (MAP)/LEAN Lender, a HUD-approved LIHTC Lender as well as a CMBS, bridge, mezzanine and preferred equity lender.
Safe Harbor Statement
Certain items in this press release may constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to the proposed offering and the anticipated use of the net proceeds from the offering. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, risks and uncertainties related to the completion of the offering on the anticipated terms or at all, market conditions, the satisfaction of customary closing conditions related to the offering, and other risks detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and its other reports filed with the SEC. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.
Contacts: Investors:
Arbor Realty Trust, Inc. The Ruth Group
Paul Elenio, Chief Financial Officer Lee Roth
516-506-4422 646-536-7012
pelenio@arbor.com lroth@theruthgroup.com
Media:
Bonnie Habyan, EVP of Marketing
516-506-4615
bhabyan@arbor.com
https://resource.globenewswire.com/Resource/Download/d66ac613-c6eb-45e7-ba35-26af0bf6c68f?size=1
SCM & KNOP news- Stellus Capital Investment declares $0.1133 dividend
Jul. 12, 2018 5:07 PM ET|About: Stellus Capit... (SCM)
Stellus Capital Investment (NYSE:SCM) declares $0.1133/share monthly dividend, in line with previous.
Forward yield 10.63%
Payable Aug. 15; for shareholders of record July 31; ex-div July 30.
Payable Sept. 14; for shareholders of record Aug. 31; ex-div Aug. 30.
Payable Oct. 15; for shareholders of record Sept. 28; ex-div Sept. 27.
KNOT Offshore Partners declares $0.52 dividend
Jul. 13, 2018 8:22 AM ET|About: KNOT Offshore... (KNOP)
KNOT Offshore Partners (NYSE:KNOP) declares $0.52/share quarterly dividend, in line with previous.
Forward yield 9.59%
Payable Aug. 14; for shareholders of record Aug. 1; ex-div July 31.
Visit the ETF Screener and select the right ETFs for your portfolio
Another good source
https://dividenddetective.com/
Sounds Good Thanks
yeah, but other than me using it, it's pretty dead...and since I'm in search of dividend stocks, I don't mind providing info elsewhere.
Be happy to help on one of the few useful pages on Ihub
Tks Should make yourself assistant here if you'd like?
p.s. just realized you're mod.on another div board,up to you
Dividend Calendar & Free online Watchlist:https://marketchameleon.com/Calendar/Dividend Free Free online watchlist Site with columns geared toward income investors. https://marketchameleon.com/Calendar/Dividend
This one too
https://www.stocksplithistory.com/
how about making this link a sticky?
CEN added another 300 share this morning CEN declaring divs thru September....unchanged. Current distribution yield for CEN is 13.96%............................Xot
NEW YORK, July 06, 2018 (GLOBE NEWSWIRE) -- Center Coast Brookfield MLP & Energy Infrastructure Fund ( CEN) (the “Fund”) today announced that its Board of Trustees declared its monthly distributions for July, August and September 2018.
Month Record Date Ex Date Payable Date Amount per Share
July 2018 July 18, 2018 July 17, 2018 July 26, 2018 $0.1042
August 2018 August 15, 2018 August 14, 2018 August 23, 2018 $0.1042
September 2018 September 19, 2018 September 18, 2018 September 28, 2018 $0.1042
Vanguard -This August, the vast majority of ETFs—nearly 1,800 of them—will be available to you commission-free. Hear from Karin Risi, managing director of Vanguard Retail Investor Group, about why we're making this exciting change. Anyone have any favorite ETFs?
https://investornews.vanguard/why-were-lowering-the-cost-of-investing-in-etfs/
Added CEN this morning!CEN declaring divs thru September....unchanged. Current distribution yield for CEN is 13.96%.........
NEW YORK, July 06, 2018 (GLOBE NEWSWIRE) -- Center Coast Brookfield MLP & Energy Infrastructure Fund ( CEN) (the “Fund”) today announced that its Board of Trustees declared its monthly distributions for July, August and September 2018.
Month Record Date Ex Date Payable Date Amount per Share
July 2018 July 18, 2018 July 17, 2018 July 26, 2018 $0.1042
August 2018 August 15, 2018 August 14, 2018 August 23, 2018 $0.1042
September 2018 September 19, 2018 September 18, 2018 September 28, 2018 $0.1042
Free online watchlist suited to income investors. Site with columns geared toward income investors. https://marketchameleon.com/Calendar/Dividend
www.marketchameleon.com
It has sortable columns for next div amount, next div date, frequency, yield, etc.
Also has fee pay service
Do you know that MVO has an expiration date?
MVO yield 16.4% ,bought 200 @ 10.61
MV Oil Trust declares $0.42 dividend
MV Oil Trust (NYSE:MVO) declares $0.42/share quarterly dividend, 15.1% increase from prior dividend of $0.365.
Forward yield 16.47%
Payable July 25; for shareholders of record July 16; ex-div July 13.
MMLP just added a few more @ 13.75 hope to get alittle run up into earnings!Divy @ 14.4 %
Divy i own ABR,SOHO,CMFN,FGB,GARS,MMLP,T,ANH,ARLP & ADES
Mortgage applications fall, as refinancing hits 20-year low
Diana Olick | @DianaOlick
Wed, 4 July 2018
CNBC.com
- A significant drop in mortgage interest rates was not enough to entice homeowners to refinance their loans last week.
- Total mortgage application volume decreased 0.5 percent on a seasonally adjusted basis compared with the previous week, and is 13.5 percent lower than the same week one year ago.
- Even those homeowners who want to tap some of the newfound equity in their home, given the sharp rise in home values, are more likely to take out a second loan rather than refinance to a higher interest rate.
A significant drop in mortgage interest rates was not enough to entice homeowners to refinance their loans last week. Total mortgage application volume decreased 0.5 percent on a seasonally adjusted basis compared with the previous week, according to the Mortgage Bankers Association. Volume was 13.5 percent lower than the same week one year ago.
Applications to refinance a home mortgage fell 2 percent for the week and were 28 percent lower than the same week one year ago, when interest rates were lower. The refinance share of mortgage activity decreased to 37.2 percent of total applications from 37.6 percent the previous week.
More than half of all homeowners with a mortgage today have rates below 4 percent, according to CoreLogic. Even those homeowners who want to tap some of the newfound equity in their home, given the sharp rise in home values, are more likely to take out a second loan rather than refinance to a higher interest rate. Home equity lines of credit are increasing as refinances decrease.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.79 percent last week from 4.84 percent the previous week, with points decreasing to 0.41 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
“Financial market volatility in response to continued worries about trade resulted in both lower mortgage rates and a drop in applications last week,” said Mike Fratantoni, chief economist at the MBA, adding that refinances saw one of the weakest readings in the last 20 years.
Lower interest rates are not doing much for homebuyers either. Mortgage applications to purchase a home rose 1 percent for the week but were 1.4 percent lower than the same week one year ago. The only gains were in FHA purchase applications. FHA loans are government-insured and offer lower down payment options to buyers with weaker credit scores.
“A shortage of inventory remains a significant constraint, but it is interesting to note that applications for government purchase loans fared better on the week, indicating that first-time buyers remain in the market,” said Fratantoni.
The critical shortage of homes for sale continues to be the most formidable roadblock to a full housing recovery. Supplies are not getting much better, and home price gains are accelerating as buyers compete for the very few good listings on the market.
https://www.cnbc.com/2018/07/03/mortgage-applications-fall-as-refinancing-hits-20-year-low.html
A Key Driver of the Bull Market Is Fading Away Wall Street is growing worried about Trump's trade war.
The S&P 500 three-month earnings revision ratio (ERR) fell for the fourth straight month in June to 1.37 from 1.52, according to Bank of America Merrill Lynch. In February, the ERR was a record 2.64 as Wall Street priced in profit boosts from the Trump administration's tax reform plan. Meanwhile, the one-month ERR fell to 0.97 in June from 2.05.
Subsequently, the S&P 500's price to earnings multiple -- or what investors are willing to pay to own a piece of a company's future profit potential -- has compressed to about 16 times from 18 times earlier in the year. A key driver of the bull market of the past year has been Wall Street pushing up their profit forecasts on the biggest companies in Corporate America. But with trade war fears dominating, Wall Street may be making early moves to price in any impact to corporate bottom lines. Should the trend continue, equities could slip further.
Around the Horn
Food for thought at the backyard BBQ today.
(1) Nick Caporella, the 82-year-old billionaire CEO of National Beverage Corp. (FIZZ) and pilot, has been accused of sexual harassment by two pilots who say Caporella touched them inappropriately while they were flying with him in his business jet on multiple trips. Caporella and National Beverage Corp. were named as defendants in lawsuits filed by the two former employees in the past two years in Florida, according to published media reports on Tuesday. To be sure, a strange story surrounding a company that is far from your typical company.
This Is Why Jim Cramer's Action Alerts PLUS Owns PepsiCo
But if you own shares in National Beverage, this is a sideshow to a bigger issue facing the owner of LaCroix: the insane amount of new competitors to the very drink that has powered the company's bottom line and stock price in recent years. With seltzer sales pegged to grow to a $6.0 billion business in the U.S. by 2021 according to Statista, up from $4.5 billion currently, companies such as PepsiCo (PEP) and Coca-Cola (KO) are moving quickly into the seltzer market. The growth is also breeding a host of upstarts with eye-catching packaging (a LaCroix staple) and clever new flavors. Just venture down the seltzer aisle this week to see it playing out in real-time.
(2) It's unlikely that the chip sale ban just imposed by a Chinese court will do sustained damage to Micron's (MU) memory sales within China, writes TheStreet's Eric Jhonsa.
Lesson of the Day
Respect weird moves in the market. That is one of the first lessons I learned when starting out as a rookie stock analyst (that was also overseeing a stock trading platform).
For instance, if shares of Lebron James Inc. are up 10% in a session on seemingly no news, when the broader market is getting taken sharply lower, chances are some form of key news is coming soon. As is always the case, someone knows something. I bring this up in light of the news of Barnes & Noble's (BKS) CEO getting the boot for unspecified violations of the company's policies on Tuesday evening. Shares of Barnes & Noble rallied about 12% from June 13 to June 28 while the broader market was under pressure and in light of another terrible earnings report on June 21. No positive news from Barnes & Noble, just shares of a company that has posted nine straight quarters of same-store sales declines moving aggressively higher. I wrote it down on a piece of paper as one to watch.
Whatever drove the odd move (guess we know now...) it was likely a bet that the ouster of the CEO would put the company in play for a buyout. Or at the very least, a better CEO that offered more hope to investors would be brought into the company. Interested in gaining more knowledge on the markets? Snag Jim Cramer's '25 Rules for Investing', they are a great read by the pool thi
ABR new 52 week high 10.94 ah
I've been saying for several years what that article says: The best dividend stocks aren't high dividend stocks. High div stocks have become far too popular. And stocks paying ultra high yields, over 10% for example, are sucker investments to be totally shunned.
Is Dividend Investing Dead? https://seekingalpha.com/article/4181679-dividend-investing-dead
ANH Anworth Declares a $0.14(Yield 11.09%) Per Share Second Quarter Common Stock Dividend https://finance.yahoo.com/news/anworth-declares-0-14-per-200500457.html ex div. date 6/28/2018
You can make your own 9.4% investment that works like that Aberdeen fund, only better.
1) Put a chunk of money in an S&P 500 index stock fund. Add some foreign index funds if you want broader exposure.
2) Withdraw 9.4% a year in monthly installments (assuming you want a monthly check). That's your Return of Capital.
Doing it my way saves you about 90% of the management fees. Aberdeen charges about 1.07% annually compared with about 0.10% for the top index funds. Such savings really add up over a long retirement.
6 High-Yield REITs With Growing Dividends
U.S. REITs were created in 1960 by Congress as a way for all investors to have access to large-scale, income-producing real estate. To qualify as a REIT, the trust must comply with IRS rules. These rules include: 1) distributing annually as dividends at least 90% of its taxable income, 2) investing at least 75% of its total assets in real estate and 3) deriving at least 75% of gross income from real estate.
The 90% distribution requirement along with no corporate income taxes are two reasons REITs yields are often above average. However, it is important to note that since REITs pay no income tax, their dividends are not eligible for the special treatment as a "qualified dividends", which are normally taxed at 15%.
When comparing REIT yields to investments with qualified dividends, you must always look at them on an after-tax basis. REITs trade on major stock exchanges and have become immensely popular since their introduction.
This week, I screened my dividend growth stocks database for REITs with a yield at or above 5% and have increased their dividends for at least 10 consecutive years. The results are presented below:
National Health Investors (NHI) is a real estate investment trust that invests in income-producing health care properties primarily in the long-term care industry. The company has paid a cash dividend to shareholders every year since 2002 and has increased its dividend payments for 18 consecutive years. Yield: 5.4%
LTC Properties Inc. (LTC) is a health care REIT that invests primarily in long-term care and other health care related properties through mortgage loans, property lease transactions, and other investments. The company has paid a cash dividend to shareholders every year since 1961 and has increased its dividend payments for 0 consecutive years. Yield: 5.5%
W. P. Carey Inc. (WPC) is a leading global net-lease REIT that provides long-term sale-leaseback and build-to-suit financing solutions for companies worldwide. The company has paid a cash dividend to shareholders every year since 1998 and has increased its dividend payments for 19 consecutive years. Yield: 6.0%
Welltower Inc. (WELL) is a real estate investment trust that invests in health care facilities, including senior housing and specialty care, and medical office buildings. The company has paid a cash dividend to shareholders every year since 1971 and has increased its dividend payments for 0 consecutive years. Yield: 6.1%
Tanger Factory Outlet Centers (SKT) is a self-administered and self-managed real estate investment trust that develops, acquires, owns, operates and manages factory outlet shopping centers in the United States. The company has paid a cash dividend to shareholders every year since 1993 and has increased its dividend payments for 24 consecutive years. Yield: 6.4%
Omega Healthcare Investors Inc. (OHI) is a real estate investment trust (REIT) that invests in income-producing healthcare facilities, mainly long-term care facilities located in the United States.
As with past screens, the data presented above is in its raw form. Some of the companies would be disqualified for poor dividend fundamentals. However some of the others may be worth additional due diligence.
My database, D4L-Data, is an Open Office spreadsheet containing more than 20 columns of information on the 200+ companies that I track. The data is sortable and has built-in buttons and macros to make it easy to use. Companies included in the list are those that have had a history of dividend growth. The D4L-Data spreadsheet is a part of D4L-Premium Services and is updated each Saturday for subscribers.
Full Disclosure: Long NHI, OHI in my High-Yield Portfolio. See a list of all my Dividend Growth Portfolio holdings here.
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AWP would an In & then Out Not along term hold like T
How do you think they pay 9.4% from their portfolio of quality low-leveraged investments that only yields about 1.5%?
The 9.4% consists of: 1) a tiny sliver of true dividends; 2) capital gains; and 3) paid-in capital. That is, they give you your own money back!
Gradually such funds get smaller and smaller due to the capital returns and they have to use Rights Offerings occasionally to replenish their assets. The Cornerstone Funds use a similar gimmick.
AWP monthly payer is a Gimmick??? , 5 cents = .15 over 3 months still about 9.4 %
Poster has questions about AWP, and-so do I.
"Does anyone have a clue what is going on with this Advisor/Subadvisor BS? Are the funds essentially being sold to another company, yet that company is going to continue to pay the same screw balls to mange it (since they are soooo good at it)!! I love this quote: "AWP?s primary investment objective is capital appreciation, with a secondary investment objective of high current income. Pending the transition, the Funds will continue to be managed by Alpine." And I am sure they get paid huge bonuses based on their "meeting" of their objectives. This CEF is pretty sad. Why can they get the share price to appreciate? I mean if you can't do that, then at least bring back the special dividends. Or just make me some money. I have been hold this #$%$ since day 1, and I would just like to be in the green for once."
"https://finance.yahoo.com/quote/awp?p=awp
AWD: "distribution policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital (the "Distribution Policy")."
https://finance.yahoo.com/news/aberdeen-global-premier-properties-fund-204500283.html
Also: https://finance.yahoo.com/quote/awp?p=awp
Gimmick Alert: AWP is the new symbol of AOD which used to be called "Alpine Total Dynamic Dividend CEF (AOD)"
"Fund [AOD} changed its name from Alpine Global Premier Properties Fund to Aberdeen Global Premier Properties Fund effective May 7, 2018 and continues to trade on the NYSE under the symbol "AWP".
Note that the fat 9.4% "dividend" is mostly a Return Of Capital which should properly be called a "Distribution." Its underlying investment portfolio consists of things yielding just 1%-2%.
Learn more here: https://www.cefconnect.com/fund/AWP
AWP bought afew today-from another poster Rarebird -Long AWP at $6.375. Dividend 9.4%, monthly payer, 5 cents. Global real estate company, with 1/3 invested in USA, 2/3's in Japan and developed Europe, with a little bit in emerging markets. The chairman and CEO has purchased over 275K of stock at prices of $6.25 and $6,27 late last year. I like the chart. It's a bit volatile.
No one (on the Street) covers this company, which suits me fine.
I run a meritocracy with my stocks. And I like when the insiders put their money where their mouth is.
Top Ranked Income Stocks to Buy for June 4th(ABR)
6:08 am ET June 4, 2018 (Zacks) Print
Here are four stocks with buy rank and strong income characteristics for investors to consider today, May 4th:
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Triton International Limited (TRTN): Free Stock Analysis Report
H&R Block, Inc. (HRB): Free Stock Analysis Report
Community Trust Bancorp, Inc. (CTBI): Free Stock Analysis Report
Arbor Realty Trust (ABR): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
GARS a good day of vol & this will be off to the races,This is being accumulated. IMHO
ANH 5.01 Bid 296000 @5.00 Ask 3200 @ 5.01 Some Fund doing alittle Buying I just added a few more
Are you Canadian?
ABR Arbor's President and CEO, Ivan Kaufman. "Now I want to tell you why we are extremely undervalued and in great investment opportunity at these levels. First, from a historical perspective prior to the announcement of the acquisition of our agency platform two years ago, we were trading at a dividend yield of approximately 9% based on a quarterly dividend of $0.15 a share. Today with a $1 per share annual dividend, if you apply the same preacquisition dividend yield analysis, we should be trading at approximately $11 a share."
"Cornerstone Back At The Trough: CLM And CRF Rights Offerings For 2018"
"I'll only add in closing that Cornerstone has an intriguing strategy here: Return capital to shareholders at an unsustainably high rate, then get a portion of it back from them by selling them new shares at a premium. Not quite a Ponzi scheme as some have called it, but an interesting spin on management-shareholder relationships."
https://seekingalpha.com/article/4174565-cornerstone-back-trough-clm-crf-rights-offerings-2018
How total return ETFs can ease tax pain John Heinzl I love dividends. Nothing brightens my day like a juicy dividend payment or, better yet, a dividend increase from one of the stocks I own.
But dividends also have a dark side: In a non-registered account, they’re taxable (albeit at a lower rate than other income). What’s more, eligible dividends are “grossed-up” by 38 per cent for tax purposes (before the dividend tax credit comes into play), which inflates an investor’s taxable income and can lead to clawbacks in Old Age Security and other government credits and benefits.
Wouldn’t it be nice if there was a way to enjoy the fruits of dividends, without the drawbacks? Well, it turns out there is: It’s called a total return exchange-traded fund.
Total return ETFs trade on a stock exchange just like traditional ETFs, but they have one key difference: They don’t hold any securities directly. Instead, they mirror the performance of an index through an agreement – called a total return swap – with a financial institution, typically a Canadian bank.
The mechanics of the swap are complex, but the important thing is that the financial institution – called the counterparty – is required to deliver the index’s total return, from price changes and dividends, to the ETF provider. No dividends actually change hands; if the stocks in the index rise 6 per cent and dividends contribute an additional 2 per cent, the net asset value of the ETF will rise 8 per cent.
Both sides of the swap agreement get something out of the deal. The counterparty collects a swap fee (in some cases) and earns interest on cash balances. Because the counterparty hedges its equity exposure, it makes money whether the index rises or falls.
For investors, swap-based ETFs offer three main benefits.
First, they provide tax advantages when used in non-registered accounts. Because no dividends are distributed to the ETF holder, there are no taxes to pay and no dividend gross-ups to worry about, either. Taxes are only payable when the units are sold, at which time any capital gains are taxed at half the rate of regular income.
Second, swap-based ETFs have very low costs. The Horizons S&P/TSX 60 Index ETF (HXT), for instance, has a management expense ratio of just 0.03 per cent. HXT can keep its expenses low because it doesn’t have to manage and rebalance a portfolio of stocks and because the counterparty – which gets its own tax benefits from participating in the structure - doesn’t charge a swap fee. However, because U.S. stocks don’t offer the same tax-saving opportunities to the counterparty, the Horizons S&P 500 Index ETF (HXS) pays a swap fee of about 0.3 per cent which, in addition to a management fee of 0.1 per cent, brings the ETF’s total cost of about 0.4 per cent.
A third benefit is that total return ETFs tend to track their underlying indexes closely. HXT has posted a five-year annualized return of 8.49 per cent – virtually identical to the S&P/TSX 60 Index’s total return of 8.54 per cent.
Horizons is the only provider of swap-based ETFs in Canada, and since launching HXT in 2010 the products have become a huge part of its business. HXT, with assets of about $1.75-billion, is now the company’s largest ETF, says Mark Noble, senior vice-president with Horizons ETFs Management (Canada) Inc.
Institutional traders were quick to embrace HXT for its low costs, “but it takes quite a long time for [retail] clients to wrap their heads around how the products work,” Mr. Noble said. “And there’s a bit of a leap of faith, too, that it is going to continue to work, and we’ve shown that it does.”
What about the risks? Dan Hallett, vice-president and principal with Highview Financial Group, points out that, in addition to the possibility that stock prices will fall, products such as HXT expose investors to “counterparty risk - i.e., the risk that the bank with which the ETF enters the swap contract will default on payments owed to the ETF.”
However, the ETF’s total value isn’t at risk - just the return under the current swap agreement. What’s more, because of the way swaps work, “the bank will owe the ETF a payment when stocks are moving up - which would generally not be happening in an economic environment that may cause bank failures,” Mr. Hallett said. “That said, the risk isn’t zero - just very small in my opinion.”
A second risk, he said, is that the government could step in and “kill the swap structure’s tax benefits just like it did to equity-forward structures that many ETFs, closed-end funds and mutual funds used through the 2000s to re-characterize interest and other income to capital gains.”
For his part, Mr. Noble said Horizons pro-actively manages counterparty risk to keep exposure to a minimum. As for the possibility that the rules could change, he called it “extremely unlikely. We’ve had these strategies running for years and we’re not too concerned about it.” Besides, he added, the government still collects plenty of tax when institutional market makers redeem units - an ongoing part of the ETF business – and when clients sell their units for a gain.
Both Cornerstone funds plummeted 8% today as they announced rights offerings. Hard to understand why these gimmicky funds sell at a whopping 25% premium to NAV.
"Mortgage REITs: The Shockingly High Price for High Dividends
"A look at the history of mREITs reveals investors pay a high price for high current dividends."
"Suppose you invested $1,000 in mREITs when they first came to market in 1970. What would your investment be worth today?
You're not sure? Guess. Just throw out a number.
When I tell you the answer, you're probably going to be in disbelief. I was.
The answer is $56.90. Yes, your $1,000 investment in 1970 would have turned into $56.90 today. You would have lost more than 94% of your principal. And over that time, you would have likely owned many different names in the index. (Annaly Capital Management and American Capital Agency are the two biggest constituents today, but it wasn't always that way.)..."
https://www.fool.com/investing/general/2014/01/25/mortgage-reits-the-shockingly-high-price-for-high.aspx
After a decade of zero percent short term rates and 2.0 to 2.5% long term Treasury rates, the interest rate yield curve has started to make dramatic shifts. The financial news coverage seems to shift daily between the dangers of a flat yield curve and the dangers of a rising yield on the 10-year Treasury. These two outcomes are quite mutually exclusive, but either scenario is a danger to the finance REITs that own large portfolios of residential mortgage securities. These high-yield stocks are not the place to gamble on the direction of future interest rates. Losing that bet will cost you more than you are likely willing to lose.
Residential mortgage REITs buy what are called residential mortgage backed securities (MBS), which are bonds backed by pools of residential mortgages. The majority of residential MBS hold loans guaranteed by one of the governmental agencies, like Fannie Mae, Freddie Mac, and Ginnie Mae. With the agency backing, these mortgage securities have AAA credit ratings. The top rating gives investors safety of principal, but also result in low yields on the bonds. For example, agency 30-year mortgage MBS currently yield around 3.5%. It takes large amounts of leverage for one of these REITs to pay 10% or 11% dividend yields. By leverage I mean a REIT borrows money to buy MBS. These companies will leverage their equity 5 to 8 times, and most of the cash to pay dividends comes from the difference between the yields on the MBS and the short term borrowing costs.
If the yield curve flattens, the interest rate spread on which a residential MBS REIT depends will shrink. A tightening spread can quickly reduce cash flow, a flat yield curve means no money to pay dividends, and an inverted yield curve means big losses for the REIT. The other potential challenge is rising long term interest rates. If this happens, the market prices of MBS bonds will fall. Lenders providing the leverage will force the REITs to sell bonds at a loss. The result is a shrinking portfolio which means less interest income flowing into the business to cover expenses and dividend payments. The agency residential MBS REIT business model needs the Goldilocks scenario of a positively sloped yield curve and interest rates that are stable to declining.
This Morningstar video about Dividend Capture Funds is excellent. The funds look shady to me... and to the commentator in the video. Like I said, I think it's just a gimmick to justify fat fees. I'm quite familiar with two ETFs that CLAIM to use some form of dividend capture (Alpine's AOD and AGD) and both have usually lagged the S&P 500 by a wide margin.
http://www.morningstar.com/videos/356587/avoid-the-dividend-illusion.html
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