Chimera Investment Corp.
5/7 Close: $2.85
Market Cap: $2.9 billion
Chimera Investment Corp. (NYSE:CIM) has a massive headline yield of over 15% right now. So if you’re asking “what’s the catch?” then you’re probably on the right track. The catch is that this specialty finance company invests, either directly or indirectly, in residential mortgage-backed securities and commercial mortgages, among other things — obviously not a great line of work right now. CIM has flopped almost 85% since 2008 highs. Dividends also have been decidedly on the decline, from 14 cents per share in April 2011 to 13 cents late last year to just 11 cents a share in its latest payout.
But the thing is, Chimera remains soundly profitable — even if its dividend payout ratio is about 100% right now. If profits squeak upward, then the yield will at worst stay steady and could very well move even higher. That’s a big if, though, considering that EPS have been on the decline for the last three quarters … so buyer beware.