in the seems to good to be true department...AHH

[hillbilly]

american home mortage investments...http://finance.yahoo.com/q/bc?s=AHH

check it out it's in the same biz as CFC or LEND, both high flyers due to low rates and lots of refi's, that's the catch of course, rising interest rate to a degree... however AHH, which used to be AHMH on the nazdaq, has restructred into more of a reit, reducing it's dependence to refi's for all it's income...pe is 5 and a 10% dividend.

earnings report is in and stellor, and they have guarenteed the dividend for the full year 2004 anyways. they did announce some sort of secondary of some sorts recently that may be holding it back a little.

i have decided to scale in for a little now and see what develops... comments and or silent prayers both welcome, heh

[adios]

For the record. I posted awhile back about Countrywide and have discussed my trades and that position is doing very well. I recommended NFI over a year ago and that trade has worked out well. With that said not sure about all the details of the AHH business model but it appears to me that they're probably a buy. Note taxable income guidance for 2004 is $3.15 to $3.30 with dividend guidance of $2.20. Here's the deal. REITs have to pay out at least 90% of their taxable income as dividends (all REITs that I know of pay out the entire amount). REITs can also have what's referred to as taxable reit subsidiaries (TSR). The net income from TSRs is taxable at the going corporate rate and income from the TSRs DOES NOT have to be paid out as dividends i.e. REITs can retain their after tax earnings from their TSRs. I'm not sure if the difference between taxable income and the dividend is due to TSR income or they are planning on deferring their dividend on some 2004 earnings (some sort of tax rules allow them to do this) and will pay them out in 2005. Redwood Trust (RWT) another MREIT did exactly this for 2002 earnings by paying out a monster special dividend in 2004:

rwt: COMPANY DECLARES SPECIAL DIVIDEND AND INCREASES REGULAR DIVIDEND FOR 2004; INCREASING PRICE TARGET TO $65 (http://www.wrhambrecht.com/ind/research/efinenab/rwt.html)

11.10.03
rwt: COMPANY DECLARES SPECIAL DIVIDEND AND INCREASES REGULAR DIVIDEND FOR 2004; INCREASING PRICE TARGET TO $65
This morning, Redwood Trust declared its regular Q4 dividend of $0.65 per share, declared a special dividend of $4.75 per share, and announced its intention to increase its regular quarterly dividend to $0.67 per share in 2004. The increase of the company's regular dividend is a clear indication that the company's business remains strong, in our opinion, as the company aims to set its dividend at a sustainable level. Even more important, however, is that the company plans to defer roughly two to three quarters of 2003 taxable income into 2004. As a result, we expect the company to again pay a sizeable special dividend at the end of 2004. Therefore, we are reiterating our Buy rating and increasing our price target to $65 per share. Full Report - PDF

I own RWT. NFI is employing a similar strategy for their excess 2003 earnings that weren't paid out as a dividend (which they are obligated to do eventually). I'd recommend NFI, RWT, and IMH as I own all three (I like CFC and LEND too FWIW). Another one you might want to consider is a CEF called First Financial symbol FF. In 2002 they paid a year end distribution of around $3.00 and in 2003 they paid a year end distribution of around $2.75 I believe. I own FF as well. AHH is on the radar screen, I just have so much of my portfolio in these suckers I don't know if I want to buy yet another one but may just do that. IMO these are for the buy and hold investor.

[GeorgeF]

Mortgage REITs like AHH borrow money and invest it in mortgages. They use very high leverage ratios. I doubt the pe, or the annual statement, mean much. I have not found the financials of Mortgage REITs to be readable, sort of mortgage Enron. I am invested in mortgage REITs, but fully expect many of them to go bust at some point, which is why they pay such high dividends, the dividends may be the only thing you get. Definately consider diversifing across different mortgage REITS or buying a mutual fund.

[adios]

Hi George and Hillbilly,

The following web site gives a lot of information on the Novastar business model. Keep in mind that some MREIT business models are similar but mostly they differ by quite a bit. NFI originates mortgages and securiterizes them through Collateralized Mortgage Obligations (CMOs) and basically captures the excess spread from the overcollateralized CMO's (not the only source of income but the main source). In contrast NLY borrows money short and buys Residential Mortgage Backed Securities with the money making them more or less a leveraged MBS bond fund IMO. AHR deals primarily in Commericial Mortgage Backed Securities and owns tranches from CDOs (similar to CMOs) of Commercial Loans. The advantage to AHR is that there is no prepay risk in their paper as convexity is an important factor when considering MBS. They all do the carry trade i.e. borrow short and lend long and make money off of the spread in interest rates just like a bank. All MREITs that I know are leveraged except AMC a small MREIT yielding around 9% or 10%. The leverage factors vary widely. NFI's debt to equity ratio is about the same as GE's for instance and much less than GM's or C's for instance. Also realize that the MBS bond market is bigger than the US Treasury market and that's what I call huge. Agreed that the business models are complicated but once understood, at least to a certain degree I think it's fairly easy to see how they can make money in the future. In constrast I find tech stock business models to be fairly easy to understand but I find it difficult to make sales forecasts for them. Also as in anything else management is an important consideration when making an investment choice in MREITs. One thing that would be a hugely negative event to MREITs is a Long Term Capital Management type event where liquidity on the short end dries up.

REITs have two choices regarding raising money for investment purposes(ignoring TSRs) either increase leverage or do secondaries. Secondaries at greater than book value are generally accretive to earnings and I've posted a formula for determining the equivalent amount of leverage when a secondary is done. Anyway here's site with a lot of information on NFI's business model as it's probably far different than AHH's business model but informative none the less:

NFI-Info.com (http://www.nfi-info.com)

[adios]

They're doing a secondary and announced special divis:

American Home Mortgage Investment Corp. Announces Commencement of a Proposed Offering of 10 Million Shares of Common Stock (http://biz.yahoo.com/prnews/040212/nyth110_1.html)

American Home Mortgage Investment Corp. Announces Commencement of a Proposed Offering of 10 Million Shares of Common Stock
Thursday February 12, 8:04 am ET
Declares Special Dividends of $0.36 and $0.19 Per Share


MELVILLE, N.Y., Feb. 12 /PRNewswire-FirstCall/ -- American Home Mortgage Investment Corp. (NYSE: AHH - News) today announced that it is commencing a proposed offering of 10 million shares of its common stock pursuant to its shelf registration statement. In addition, the company has granted the underwriters an option to purchase from it up to 1.5 million additional shares to cover over-allotments, if any.

The company is also announcing today that, due to the timing of the offering, its Board of Directors has declared two special dividends in lieu of one regular dividend at the end of the first quarter. The first dividend of $0.36 per share is payable on March 10, 2004, to stockholders of record as of February 25, 2004. The second dividend of $0.19 per share is payable on April 14, 2004 to stockholders of record as of March 31, 2004.

The offering is being lead managed by Friedman, Billings, Ramsey & Co., Inc. and Lehman Brothers Inc. Flagstone Securities, LLC will serve as a co-manager. When available, copies of the preliminary prospectus supplement for the offering may be obtained by contacting one of the underwriters. A registration statement relating to these securities has been filed with the Securities and Exchange Commission and has been declared effective.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws of any such state. Any offer, if at all, will be made only by the means of the prospectus, including the prospectus supplement, which forms a part of the effective registration statement.

ABOUT AMERICAN HOME MORTGAGE INVESTMENT CORP.

American Home Mortgage Investment Corp. (NYSE: AHH - News) is a mortgage real estate investment trust focused on earning net interest income from self-originated mortgage backed securities, and through its taxable subsidiaries, on originating and servicing mortgage loans for institutional investors. Mortgages are originated though a network of 272 loan production offices as well as through mortgage brokers and are serviced at the Company's Columbia, Maryland servicing center.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This news release contains statements about future events and expectations, which are "forward-looking statements." Any statement in this release that is not a statement of historical fact, including, but not limited to earnings guidance and forecasts, projections of financial results, and expected future financial position, dividends and dividend plans or business strategy, is a forward-looking statement. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause American Home Mortgage Investment Corp.'s actual results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Specific factors that might cause such a difference include, but are not limited to: the potential fluctuations in American Home Mortgage Investment Corp.'s operating results; American Home Mortgage Investment Corp.'s potential need for additional capital; the direction of interest rates and their subsequent effect on American Home Mortgage Investment Corp.'s business and the business of its subsidiaries; federal and state regulation of mortgage banking; and those risks and uncertainties discussed in filings made by American Home Mortgage Investment Corp. with the Securities and Exchange Commission. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from expectations. American Home Mortgage Investment Corp. does not assume any responsibility to issue updates to any forward-looking statements discussed in this press release.

Source: American Home Mortgage Investment Corp.

[hillbilly]

any thoughts on why they are splitting the .55 divi into .36 and .19 and paying out the .36 part of it early? i don't get it.

i knew the secondary was coming, thats why i just put part of my money into it at first. most times the secondary puts a little downward (shortterm) pressure on the stock but as a general rule once it's placed it's onward and upwards from there. so we shall see...

[squiffy]

Good question. There could be many different reasons. They may want to use the cash temporarily for business development or investment purposes, instead of paying it all out at once. Or they may need money to pay the debt. Or perhaps having several quarterly dividend payments keeps the stock price more stable if some people are just out there trying to buy or avoid the dividend. Possibly if you read one of their most recent SEC filings the reason will be disclosed therein. Though you often have to read between the lines to find the real reason.

If they are making a secondary offering sounds like they want more cash now, either because they are having problems or because they are doing well and need the money to grow the business. Which would tie in with not wanting to pay the entire dividend now.

[adios]

I assume it has something to do with the secondary and paying it out before the additional shares are sold to minimize the temporary dilutional effect of the secondary. I'll make sure I'm write and report back. I use the word temporary because secondarys at premiums to book value are accretive to earnings in the long run for these MREITs. It takes time to deploy the capital raised. I posted a formula on this site previously for determining the long term effect on earnings for these secondarys. I'll dig that up too. BTW the main underwriter of AHHs secondary is Friedman, Billings, Ramsey (FBR) an MREIT with a broker-dealer as a taxable subsidiary. The broker-dealer and the MREIT merged in 2002. The money manager who recommended REXI was pounding the table on the MREIT before the merger. Some didn't like it and I listened to them. I sold the MREIT at $10 and today it's $25 and change. Fortunately I realized the error of my ways and bought back in at $17 after FBR announced their own secondary. The stated yield on FBR is around 5% I believe but they said in their conferance call very recently that they'll be paying a couple of special divies that will give FBR at least a 7%+ yield. Lot's of deals in the pipeline for the broker dealer apparently.

[adios]

Hillbilly and George must have been buying all they could get with both fists /images/graemlins/smile.gif.