Chimera Investment Corporation (NYSE:CIM) presents a lucrative opportunity for investors seeking high dividend income with its preferred offerings Chimera Investment Corporation PFD SER B (NYSE:CIM.PR.B) and Chimera Investment Corporation 8% PFD CUM SER D (NYSE:CIM.PR.D). These preferreds are currently yielding over 11% and are well supported by assets and cashflows.
Exploring the High Yield Phenomenon
Chimera's preferreds were initially meant to yield 8%, but due to a unique fixed-to-floating structure, they now offer over 11% returns. This article delves into the factors contributing to this unusually high yield.
Assessing Risk and Reward
Analyzing the fundamentals of CIM's underlying business is crucial to understanding the risk associated with investing in preferreds. Factors such as asset health, cashflow coverage, and equity cushion play a significant role in determining the stability of preferred dividends.
Evaluating Investment Options
Comparing the different series of preferreds (B, C, D) offered by Chimera allows investors to assess which one suits their investment goals best. Each series has its advantages, and choosing the right one can lead to a favorable income stream.
Untapped Potential and Mispricing
Market awareness of the high yields offered by CIM's preferreds is still lacking, presenting a potential opportunity for investors. Mispricing due to recent conversions to floating rates means that these preferreds are currently undervalued.
Redemption Opportunities
While redemption of the preferreds may pose a risk in terms of finding a new income source, the potential for profit from the redemption is an enticing prospect for investors.
Conclusion
Chimera's preferreds offer a unique chance for investors to earn over 11% in dividend yields with moderate risk. The evolving market dynamics and the company's stable business position make these preferreds a compelling investment option in today's landscape.