CYS Investments (CYS) trades below book and below peers’ valuations, and the real estate investment trust yields a double-digit, sustainable dividend, making this company attractive to some investors despite the generally neutral stance on agency REITs, according to Daniel Altscher, Research Analyst and Vice President at FBR Capital Markets & Co.
“The stock is trading a little bit above 90% of book value, which I think is pretty reasonable when you see a lot of their competitors trading maybe at 95%, closer to the book value. And I think the dividend will be sustainable for now, and an 11% dividend yield, I think that’s relatively attractive for a stock trading at a 90% of book value, plus shares have lagged overall year to day. They’re actually down about 1% versus the group, which is up 2%,” Altscher said.
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Altscher says CYS has a solid management team and an attractive valuation, and he expects this agency REIT’s new investments to result in positive stock performance and ROE.
“I think the risk/reward there is pretty favorable, and you recently saw the company raise money doing a new preferred equity issuance. I think the spreads on those new investments are more attractive than the overall in-force books, so I think that paves the way for a higher overall ROE, a higher overall dividend, which should play out nicely for shares,” Altscher said.
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