If you measure it by book value, as this article seems to suggests you do, it is OVERSOLD NOW, according to SA's metrics, on this website. Cash flow is consistent and monthly divs are dependable. At the end of 2022, the company's Agency RMBS portfolio had reduced to $3.5 billion. And as a result, at this point, the price movement has been far ahead of the fundamentals as seen in the next chart. Company is doomed garbage IMO. With mortgage REIT stock prices struggling, all three of these mortgage REITs now have massive annual dividend yields ranging from 17.72% to 32.25%. Currently, the price to TBV ratio is 1.04, close to the historical high watermarks, because the price movement has been far ahead of the recovery of the fundamentals. They just raised a lot of capital to invest for more earnings but they are still gun shy from March and are making a lot of low risk investments that dont pay as much. Russia-Ukraine war latest: Ukraine advancing 'despite - Sky News The REIT collects the interest from these securities. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. I jumped in a bit early at 5.15 in both my roth and trad IRAs. They really do so this year.and even with these lower coupons, while they do not cover the dividend in and out of themselves, in conjunction with the benefits of the hedgeshortfall in the near-term, which I'm not sure that would be, we still view this as much more desirable. Robert Cauley - Chairman and CEO. I wrote this article myself, and it expresses my own opinions. The company can also change the amount of leverage that they use. To make the world smarter, happier, and richer. Their portfolio does not justify the stronger performance. To qualify as a REIT, companies need to pay out 90% of their taxable income to investors through dividends. Most mREITs are priced at some multiple to BV, sometimes trading at a premium like ORC does today or sometimes at a discount. Lees ons privacybeleid en cookiebeleid voor meer informatie over hoe we je persoonlijke gegevens gebruiken. Since the end of Q3, Treasury rates have risen by ~70 bps, so I expect this has caused its book value to slide by ~17% to around $3.9. 7 Blue-Chip Stocks That Pay You Monthly Dividends. Income investors should be very cautious when buying into ORC for dividend income purchases. I am not receiving compensation for it (other than from Seeking Alpha). Yesterday, AGNC reported a preliminary loss in the third quarter of between $1.99 and $2.03 per share. Orchid Island Capital, Inc. operates as a specialty finance company, which engages in investing in residential mortgage-backed securities (RMBS). The company lowered its dividend numerous times in the last 10 years and the management is not keen on providing stable and secure dividends. The fourth quarter saw a decline of $3.7 million in interest income compared to previous quarters. Why Is Orchid Island Capital's Dividend So High? It's also important to look at the dividend trend. At this point, the price movement has been far ahead of the fundamentals. *Average returns of all recommendations since inception. At the end of Q4, its book value was likely closer to its price today since mortgage rates have spiked the most during Q1. ORC has a notably poor history of seeing its book-value slide, and the recent spike in rates will likely accelerate those declines. Get the latest Orchid Island Capital, Inc. (ORC) stock news and headlines to help you in your trading and investing decisions. Fannie Mae has forecasted a 1.5% drop in housing prices while Freddie Mac predicted a decrease of 0.2%. ORC - Orchid Island Capital, Inc. - Yahoo Finance PDF Orchid Island Capital, Inc. (ORC) - Sure Dividend During the fourth quarter, the management conducted a share buyback of approximately 2.5 million shares with a weighted average price of $9.30 per share. If you have an ad-blocker enabled you may be blocked from proceeding. For the best MarketWatch.com experience, please update to a modern browser. I don't see a balanced, objective analysis here Would like to see your comments on the CEO's narrative to their results and/or what was said during their conference call. Entering text into the input field will update the search result below. Returns as of 07/01/2023. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 10 year treasury yield forecast (econforecasting.com). That generates a yield rate of 16.5%, which would be considered very high for a typical stock. Despite the 17% dividend yield, investors need to tread carefully when they consider this mortgage REIT. VERO BEACH, Fla., August 30, 2022--Orchid Island Capital, Inc. (NYSE:ORC) ("Orchid" or the "Company"), a real estate investment trust ("REIT"), today announced that it has completed the previously . To report a factual error in this article. I have no business relationship with any company whose stock is mentioned in this article. Why Shares of Orchid Island Capital Fell Today, Orchid Island Capital, Inc. (ORC) Q3 2020 Earnings Call Transcript, Orchid Island Capital Inc (ORC) Q1 2020 Earnings Call Transcript. Orchid Island Capital Inc. - MarketWatch I am not receiving compensation for it (other than from Seeking Alpha). The stock lost about a 12% of its tangible book value (TBV) on a per share basis and almost 60% of its share price during the pandemic, as seen from the chart below. But there is little improvement in the tangible book value, and the income generation capability is far from fully recovered. Analysts Disclosure: I/we have a beneficial short position in the shares of NLY either through stock ownership, options, or other derivatives. Source: author based on Seeking Alpha and FRED data. From the end of 2021 until the end of 2022, the companys average shares outstanding grew by a staggering 54%. NYSE - Nasdaq Real Time Price. The company decreased its RMBS portfolio in the last quarter which boosted its book value but this was only a temporary solution. As seen, the TBV has been in continuous decline since 2012, at a rate of 9% CAGR. This browser is no longer supported at MarketWatch. This chart shows the annual highs and lows of price to TBV ratio during recent years. 17 See ORC Report InvestorsObserver is giving Orchid Island Capital Inc (ORC) an Analyst Rating Rank of 75, meaning ORC is ranked higher by analysts than 75% of stocks. destenlee 2 yr. ago. The economic numbers announced today highlight the difficulty for investors today, where weak numbers bring recession fears and strong numbers bring Fed fear, said Louis Navellier, founder and CEO of grow. Due to all of this uncertainty, I am not currently planning to purchase any mortgage REIT stocks, despite their appealing valuations and dividend yields, but will be actively monitoring the situation. Book value per share for a mortgage REIT is, basically, the value of its portfolio. Yield and stock price go in opposite directions, with a falling price leading to a higher yield and vice versa. ORC has proven to be pretty solid in delivering good dividends. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. ORC already lowered its dividend from .08 to .06 bs k in April 2020. Orchid Island Capital Inc (NYSE:ORC), a mortgage real estate investment trusts (reits) company based in United States, received a lot of attention from a substantial price movement on the NYSERead . To make the world smarter, happier, and richer. Orchid Island Capital (NYSE:ORC) stock currently features a dividend yield of more than 15%. The BV in September was $4.77, the earning report said it dropped by .43, so shouldn't it be $4.34? At the end of March 2023, the estimated book value was $11.56 per share. Thx for reading! Is this happening to you frequently? recovered. There are currently no items in this Watchlist. The fundamental reason is that the yield spread measures the risk premium investors are willing to pay for ORC relative to other assets such as BAA bonds. Why Is Orchid Island Capital's Dividend So High? That means the dividend will eventually have to go down, particularly if the company's earnings aren't strong. Intraday data delayed at least 15 minutes or per exchange requirements. Since ORCs large portion of the portfolio consists of RMBS the decline in new mortgage originations will make the managements position difficult in the short term. Additionally, if the Fed decides to stop rate hikes or extend Q.E. It is not a huge dividend but apparently quite consistent. Orchid Island Capital, Inc. assumes no obligation to update forward-looking statements to reflect subsequent results, changes in assumptions or changes in other factors affecting forward-looking . The risk with running leverage so high is that they could get a margin call and have to sell their MBS at a loss when the market is contracting. Additionally, rates are still meager compared to long-term inflation expectations, so there is reason to believe mortgage REITs may continue to decline. Since then, price has recovered by quite a bit and is close to the pre-pandemic level. Particularly as shown in the orange box, when the spread is about 17% or higher as mentioned above, the total returns in the next 1 year are all positive and have been all quite large (all the way up to ~70%). As short-term rates have skyrocketed and the yield curve has flattened, many have seen their book values decline dramatically, and their cash-flows tighten. If You Invested $1,000 in Annaly at the Start of 2023, This Is How Much You Would Have Today, 4 Unparalleled Growth Stocks You'll Regret Not Buying in the Wake of the Nasdaq Bear Market Dip, 3 in 10 Americans Say This Is a Major Retirement Concern -- and They're Right, 1 Growth Stock Down 92% You'll Regret Not Buying on the Dip, 5 Stocks That Could Be Easy Wealth Builders, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Some smaller mortgage REITs such as Orchid Island Capital (NYSE:ORC) have become very popular with dividend investors. Orchid Island Capital stock currently features a dividend yield of more than 15%. Orchid Island Capital's Dividend Remains Unsafe - Wealthy Retirement They are looking at protecting the fund more then covering the dividend. And With the stock market in the red for the third straight week and recession warnings ramping up, markets are more volatile than ever. Orchid Island Capital has significant downside risk in the current situation due to its high leverage and lack of hedges against spiking mortgage spreads. After a significant book value per share decline, of more than 50% in the first 9 months of 2022 in the last quarter, the company could increase its book value per share by 4.5%. Is Orchid Island Capital a Great Dividend Stock? Adding on the estimated 17% impact of interest rates, we have a total estimated decline in book value of around 35% with a range of 30-40% since we don't know how its portfolio has been altered. Currently, the company boasts a staggering forward dividend yield of 18% and a forward "P/E" of only 4x. Add ORC to your watchlist to be reminded before . We fund these investments through short-term borrowings structured as repurchase agreements. We invest in residential mortgage-backed securities which are issued and guaranteed by a federally chartered corporation or agency (Agency RMBS). At the same time if the stock price is heading to $12-13 they might issue additional shares. Such a yield analysis provides a useful indicator for gauging the investment risks in the near time, and opens up opportunities for dynamic allocation to benefit from the price movement in the short- to mid-term, as seen in the next chart below. There are a couple of concerns, though. Please. Long-term mortgage rates have also risen dramatically from ~3% to roughly 4% today. Cookie Notice Updated (). increase its book value per share by 4.5%. I expect this trend to continue in the first and second quarters of 2023, as well with a less positive impact on the companys NII. Subsequently, the Federal Reserve launched its massive Q.E. While this is not a lot of money, it is consistent money that underlies the entire operation of the REIT. I'm stunned that totally missing is a discussion of the per share income, and what analysts or others are projecting, or what management has guided or not guided. Another way to gauge the margin of safety is to look at the yield spread between ORC and a high yield index, and here I use the Moody's Seasoned BAA Corporate Bond Yield. the percentage of the share price that's paid out annually? Orchid Island Capital, Inc. (ORC) Latest Stock News & Headlines - Yahoo Analysts Are Neutral on Top Financial Stocks: Omega Healthcare (OHI), Orchid Island Capital (ORC). This issue is known as "spread risk" and is the primary culprit for the recent string of declines in mortgage REITs. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Back up the truck! Monthly Dividend Stock In Focus: Orchid Island Capital Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Orchid Island is working to position itself for a recovery, owning lower-coupon, long-duration CMOs that would be expected to appreciate notably in value if interest rates fall. This time, will the company's dividend growth have staying power? Currency in USD, Gain actionable insight from technical analysis on financial instruments, to help optimize your trading strategies. I am not receiving compensation for it (other than from Seeking Alpha). Why Is Orchid Island Capital's Dividend So High? | Nasdaq Orchid Island Capital downgraded to neutral from buy at Ladenburg Thalmann, Short Interest Sector Focus: Real Estate Sector. BV x spread (here spread means the spread between their borrowing costs and their investment yield) x leverage = gross yield. On the surface, this company is very attractive to many investors. We invest in residential mortgage-backed securities which are issued and guaranteed by a federally chartered corporation or agency ("Agency . That table makes it pretty clear that the dividend has been trending lower since 2014. A certain risk can be accepted. Thoughts on the Orchid Island Capital Inc (NYSE: ORC) stock - Reddit How low can the stock price go? Shares of the specialty finance company Orchid Island Capital (ORC-0.53%) dropped 11.4% today after the company announced first-quarter earnings guidance and an analyst downgraded the stock. Still, the really important piece of this story comes when you compare the yield, the dividends paid, and the stock price. And at the same time, I have been managing several investment accounts for my family for the past 15 years, going through two market crashes and an incredible long bull market in between., My writing interests are mostly asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets. Why Shares of Orchid Island Capital Fell Today, Orchid Island Capital, Inc. (ORC) Q3 2020 Earnings Call Transcript, Orchid Island Capital Inc (ORC) Q1 2020 Earnings Call Transcript, Orchid Island Capital Inc (ORC) Q1 2019 Earnings Call Transcript, Cumulative Growth of a $10,000 Investment in Stock Advisor, Join Over Half a 1 Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. As seen, the annual highs are in the range between ~1.1x and 1.4x, with an average of 1.2x. Fair Value is the appropriate price for the shares of a company, based on its earnings and growth rate also interpreted as when P/E Ratio = Growth Rate. Most mortgage REITs borrow in the short-term repurchase market and use that capital to buy mortgage-backed securities (pools of mortgages) with longer maturities, often at 8-12x leverage. Invest better with The Motley Fool. I estimate Orchid Island's book value has declined to around $3.1 per share, though an extensive range around this figure should be used since we do not know its specific sensitivity to spread risk. Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. I have no business relationship with any company whose stock is mentioned in this article. Is Orchid Island Capital a Great Dividend Stock? What is the payout ratio, meaning what percentage of earnings goes to the dividend? Sie knnen Ihre Einstellungen jederzeit ndern, indem Sie auf unseren Websites und Apps auf den Link Datenschutz- und Cookie-Einstellungen oder Datenschutz-Dashboard klicken. In other words, Orchid Island's CMOs are declining in value given the rising interest rate environment, which can be seen in its book value change over the past year. The Motley Fool has no position in any of the stocks mentioned. The mREIT sector has underperformed the S&P 500 index in the last 12 months and, likely, the next 6-8 months will not be different. Just see who it is associated with. As can be clearly seen, first that is a positive trend, indicating that the odds and amount of the total return increases as the yield spread increases. Income investors might want to avoid ORC stock as the managements top priorities are far from a safe and stable dividend. A traditional REIT owns physical property and leases it out to tenants. Orchid Island Capital: Be Careful With The 15% Yield - Seeking Alpha I had a small amount of shares for awhile but I sold them for greener pastures. I/we have a beneficial short position in the shares of NLY either through stock ownership, options, or other derivatives. And look forward to hearing your thoughts and comments. What Is The Ownership Structure Like For Orchid Island Capital - Nasdaq This prediction is, more or less, exactly what has brought ORC down since then. The stock lost about a 12% of its tangible book value and almost half of operation income during 2020. ORC's ex-dividend date. Book value can move around during the quarter from changes in rates and spreads and hedging. While the yields are super attractive, the dividends are paid from existing capital (book value) and earnings, which could continue to face pressure and may lead to dividend cuts in the future. Analysts Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours.
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