RE:Really Don't Get It They are considered a second tier mortgage lender and lend to people/companies that have below high end credit or higher leverage than the big banks are willing to lend to, most equate that to higher risk and because of that higher risk profile they are able to charge higher rates.
To be fair this company does belong in a mid risk category and in a turbulent housing market this stock will suffer, but the market has been strong for years. And to be fair we did pay a higher than current dividend for a short period a few years ago but when things pulled back and it became unsustainable they pulled back on it. We currently obviously could pay more than was announced but they are trying to be cautious as eventually this bubble will pop and we might be affected, be it less people looking for loans is the likely scenario or even defaults from current customers.
I believe because we are a lower tier finacial instrument and our shares are somewhat illiquid (like similar companies in our sector) we are not an attractive investment for many institutional investors with specific mandates for fund requirements, which I believe is why we got bumped again from the LSERM list of Margain eligible companies (I believe only 1 of the 7 in our sector I know of are on the LSERM), that alone is a red flag for institutional investors that can not leverage against our shares.
As far as the price movement this week, a bunch happened lol... we are lightly followed so sometimes it takes a little time for news to effect movement also because of illiquidity share prices can jump a little (this has actually been less of an issue the bast few years, in the past we moved very similarly to the way BRE moves now, very snappy through a day)... more over to the delayed reaction the day after our announcement the Russian-Ukraine issue got bigger and much of the market pulled off for a day or two as people got scared and moved to cash until more was known and then we experienced tho push up. All my non bank financial stocks (and I have a few) moved similarly and most were actually releasing positive info this week. It was more of a market/sector issue than stock specific.
As a retail investor like you, I like the fact that institutional investors and funds avoid us, means I can continue to pick up shares on the cheap to collect a high rate yeild. I was mulling a new purchase in my taxable account before and on the news, but the LSERM and Ukraine issue kept me from throwing in an order which may have been a minor mistake in hind sight, but I felt more safe with a little liquidity, also MKP makes up 20-25% of my investment portfolio which I am trying to get lower organically but constant opportunities that are instantly advantageous are hard to pass up. I also hold the other LSERM eligible name in this sector in that account FC, which my plan is to cycle out of eventually and either get into BRE or purchase more MKP, but I do like to play on Margin so I've taken pause for now.
I was going to do maths (may still eventually) on the news release as a guide, at $18 the announcement was technically a 11.6% raise on your dividend payout considering the new shares you will have going forward which is more attractive that the 6% they show on paper. But that add on value lowers as the price increases before the period that creates the new share value against the special. I would have to do the maths, but it's now likely an all in raise of around 10% at the current close.
There are a few good things about the special being paid in shares. One is that most of the money allocated to the special does not leave the companies hands, and it allows them to utilize the money quicker in the cycle than preparing anouther Rights offering or public offering, also because they do not need to prepare those things, they do not need to pay someone to overlook those offerings, so its a much cheaper option. Also these shares are non dilutive to investors unless you choose to sell some shares, but it adds potential for us to become more liquid as some investors will sell a portion if they are adhering to a strict portfolio weighting as this will throw your weight a little out of whack especially with the sharp raise late in the week, your holding value jumped in the area of 10% in a couple days.
As far as being on board, be very pleased your in the boat with us and welcome!