CYS Investments Inc (NYSE:CYS) going strong on scheduled dividend
Late last week, the mortgage REITs sector rallied, with all the prominent mREITs reporting profits and announcing dividends. CYS Investments, Inc. (CYS) will commence trading ex-dividend on 21 June 2013. A $0.34 per share cash dividend payment is scheduled to be paid-out on 17 July 2013. To a certain degree, it was the rally in the stock market that lit up the lights round the REITs, the main reason was the dividend announcements that some mREIT’s made. The rally does not seem like one that will be able to hold its ground for too long and it would be wise for investors to take more than a cursory glance at future approach for each one of the mREIT’s before taking any investment decisions.
Taking the current interest-rate volatility into consideration, analysts were of the opinion that mREITs like CYS Investments Inc (NYSE:CYS) will face strong downward-pressure on their respective book values and that these greatly-leveraged corporate structures will also face volatility in their returns. The dividend cuts that occurred across the sectors, especially with JAVELIN Mortgage Investment and ARMOUR Residential were what analysts were possibly basing their conclusions on. However, both these REITS managed to maintain dividends, and ideally, what they should be aiming at in the future is to rebalance their investment portfolios to match the current environment in a better manner.
CYS’s announcement was no surprise news and it was expected to maintain the dividend rate of $0.34/ share. Currently mREITs are going through a lot of volatility. This results in them reporting book value erosion.
WHAT IS BOOK VALUE?
Book value is the total value of the assets of a company that equity stakeholders would be theoretically receiving in the event that a company is liquidated. Comparing it to the market capitalisation of a company, the price-book value ratio indicates whether a particular stock is under-priced or overpriced.
Book value is generally less-volatile than either profits or dividends. This is what makes it the most reliable ratio in uncertain times such as the ones that are currently being experienced. However, investors need to ensure that the book values used by them are reliable and that managements have not ‘boosted’ them.