Raining REIT Shares
It was interesting that two mortgage REITs, Annaly (NLY) and Hatteras (HTS), both started the new year off by issuing shares. In both cases the companies plan to use the new money to buy more mortgage paper and leverage it up - basically expand the current business models.
The fact that two companies that have been good performers both think it's worth raising new capital is a good indication that the run isn't quite over yet.
Investors in these puppies should be alert for any signs that short-term rates are about to head up. The dividends are awesome, but climbing short-term borrowing costs combined with the leverage used will crimp the margins fast. I'm using QE2 as a barometer - if the Fed stops that, short-term rate hikes might not be far off and I hope to be out before a rate hike.
Disclosure: I own shares of HTS and, if the drop following the share issue announcement holds, will probably add a little once the lock out window of the Fool's disclosure policy opens back up.
Questions or comments welcome here or at the article.
And we've only got through the 7th to stack up dimes for Foolanthropy.