*Average returns of all recommendations since inception. Making the world smarter, happier, and richer. To qualify as a REIT, companies need to pay out 90% of their taxable income to investors through dividends. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Despite the 17% dividend yield, investors need to tread carefully when they consider this mortgage REIT. I wrote this article myself, and it expresses my own opinions. Als u niet wilt dat wij en onze partners cookies en persoonsgegevens voor deze aanvullende doeleinden gebruiken, klik dan op 'Alles weigeren'. This was due in large part to the successive interest rate cuts in the third quarter. Wall Street analysts are rating ORC a Strong Buy today. However, potential investors attracted to the yield need to be aware of the potential dangers both valuation and quality dangers. How fat? And the annual lows are in the range from 0.6x to 0.9x, with an average of 0.7x. It is telling to start off a discussion of dividend yield by looking at Orchid Island's dividend history. The stock trades at about $6.15 per share and has had a rough year. 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. Entering text into the input field will update the search result below. Why Orchid Island Capital Should Face A Correction And How To Profit Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Rising rates in spite of the FED's reluctance to act, a decreasing ORC BV as we speak, an 18%+ yield and no hedges in place. 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. . I will hold through any turbulence though. TBV is the source of income for mREIT businesses. Were 54, have $4.5 million in savings but dont know how to withdraw it in retirement. Orchid Island Capital (ORC) stock has lost 14.9% since I published my bearish article in August 2020. . Is this happening to you frequently? The company experienced some uptick in the fourth quarter of 2022 but the difficulties are very likely to continue in 2023 as well. But there is little improvement in tangible book value, and the income generation capability is far from fully recovered. Please disable your ad-blocker and refresh. According to the median forecast of eighteen voting members of the FOMC, there is one expected quarter-point rise in interest rates this year, followed by rate cuts after 2024. Please disable your ad-blocker and refresh. program, which caused trillions in new money to flow directly into the mortgage-backed-security ("MBS") market. The 30-year mortgage spread has risen by roughly 60 bps since the end of October. Book value down to around $3.40 now. Income investors might want to avoid ORC stock as the managements top priorities are far from a safe and stable dividend. In a little over a year, the company's book value has declined by over $10 a share, or roughly 47%. Reuben Gregg Brewer has no position in any of the stocks mentioned. And look forward to hearing your thoughts and comments. program, mortgage rates began to climb, causing mREIT book values to decline rapidly. Read more to see why prospects for ORC are not good. This brings us to Orchid's earnings. I/we have a beneficial short position in the shares of NLY either through stock ownership, options, or other derivatives. Most mREITs are priced at some multiple to BV, sometimes trading at a premium like ORC does today or sometimes at a discount. Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. These are often called something like collateralized mortgage obligations, or CMOs. At this point, the price movement has been far ahead of the fundamentals. I have no business relationship with any company whose stock is mentioned in this article. Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. Granted, the dropping dividends sucks . You can skip our detailed analysis of dividend stocks and their performance, and go directly to read 5 Stocks That Pay Dividends Monthly. Wonder if they have to reduce the dividend again for next month? Still, AGNC and Orchid have nearly identical portfolios (almost entirely fixed-rate residential agency mortgage-backed securities), and Orchid has slightly higher leverage. Is this bearish or bullish for ORC? 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. Orchid Island currently pays a monthly dividend of $0.16 per share. This massive decline was due to the RMBS and asset allocation decisions of the management and party because of the new share issues. Hard to resist 15% plus yield on a $5 stock. Russia-Ukraine war latest: Ukraine advancing 'despite - Sky News This substantial and still ongoing infusion helped keep mortgage-backed securities afloat and managed to push mortgage rates to extreme lows of 2.5%, substantially boosting the book-values of many mortgage REITs (as their MBS assets rose in value). *Average returns of all recommendations since inception. Orchid Island Capital has significant downside risk in the current situation due to its high leverage and lack of hedges against spiking mortgage spreads. 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. We see it (the dividend) as sustainable, and as I mentioned. If earnings go up next quarter yield will remain the same. You should not buy Orchid Island stock without fully understanding the very complicated nature of the mortgage REIT model. If you have an ad-blocker enabled you may be blocked from proceeding. Please. I'd estimate the current BVPS to be about $4.10 due largely to unrealized mtm BVPS adjustments, which will be backed-out as the Fed proceeds with it base case scenario, for which ORC is well positioned. Is Twitter down? Though it took time for that bearish view to pan out, the company is now down 29% since (only 11% after accounting for its dividend). With shrinking TBV, the income generation ability also shrinks. Back up the truck! It also estimated that its tangible net book value per common share at the end of Q3 was roughly between $9.06 and $9.10 per share. Invest better with The Motley Fool. Other mREITs have more strategic non-agency assets that carry higher default risks and yields. April 21, 2023 05:42 am EDT Reuben Gregg BrewerThe Motley Fool -> Big dividend yields aren't always what they seem even though they tend. This has reduced interest income but also resulted in a significant boost to ORCs book value over the last two months of 2022 and into 2023. I am not receiving compensation for it (other than from Seeking Alpha). I wouldnt be backing up the truck right now.. [ when] they cut will be time to back up the truck.. A yield of 15 % is extremely high. The significant difference between mREITs is whether or not they focus on "agency" mortgage-backed securities that carry low default risks due to guarantees from Fannie Mae (OTCQB:FNMA) and Freddie Mac (OTCQB:FMCC). The company's recent dividend cut and aggressive increase in shares outstanding over the past year is a strong sign that management is concerned about its cash position. ORC runs leverage at the high end, over 9 times and their spread was still over 2, so they should be able to cover the dividend at the current rate. As seen, the TBV has been in continuous decline since 2012, at a rate of 9% CAGR. 2022 was a disappointing and difficult year for ORC. And even if they cut the dividend, it's suppose to fluctuate month to month, right? These 4 REITs Have Huge Dividend Yields - But Are They A Trap. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. News Sentiment Orchid Island Capital has a news sentiment score of 0.52. Furthermore, it's a bit hard to say how the Fed's effort to reduce its balance sheet in a process known as quantitative tightening, in which it lets its own bonds mature and run off, effectively pulling liquidity out of the economy, will impact MBS yields. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. for mortgage-backed securities, ORC and other mREITs could see their prospects improve. Proven solutions for both high income & high growth with isolated risks. The first line of the REIT's corporate overview is very clear: "Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities on a leveraged basis." Follow me for comparison articles such as AAL vs. LUV or USB vs. C. Yet, they keep paying us. a 42% drop. buying anything below $5. Weak Dividend Index Excellent Headlines Orchid Island Capital (ORC) Passes Through 19% Yield Mark 5/31/2023 - Dividend Channel Orchid Island Capital, Inc. (NYSE:ORC) Short Interest Down 31.0% in May 5/29/2023 - Ticker Report Reminder - Orchid Island Capital (ORC) Goes Ex-Dividend Soon 5/26/2023 - Dividend Channel Discounted offers are only available to new members. He argued its ' the best yield and stock @ $3.26 with a 17% yield'. The Motley Fool has a disclosure policy. Lenders that borrow in the short-term market and lend at long-term maturities see their net-interest margins collapse with the yield curve. In terms of quality, the stock may have trouble maintaining current dividend level in the near future. Is this happening to you frequently? The company also estimates a book value per share of $11.56 as of March 31 which will be a 3% decline Q-o-Q. ORC - Orchid Island Capital, Inc. Stock Price and Quote - FINVIZ.com Im holding onto it. 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 . Orchid Island Capital stock currently features a dividend yield of more than 15%. Ukraine's counteroffensive continues in southern and eastern Ukraine, officials have reported - but a top general has warned that its advance may be hindered by one thing. Investors looking for a reliable income stream should pay close attention to the REIT's dividend history. In the first quarter, the book value per share is likely to decline again, following most of 2022s trends. The traditional pass-through Agency RMBS include mortgage pass through certificates and collateralized mortgage obligations. 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. They could go higher yet. At this point, the price movement has been far ahead of the fundamentals as elaborated more below. Orchid Island Capital, Inc. is a Real Estate Investment Trust, or REIT, operating in the mortgage industry. Orchid Island had to cut its dividend earlier this year. Orchid Island Capital Inc. - MarketWatch ORC already lowered its dividend from .08 to .06 bs k in April 2020. Preview: Orchid Island Capital's Earnings. I wrote this article myself, and it expresses my own opinions. In terms of quality, the stock may have trouble maintaining current dividend level in the near future. And 1 indicates a perfectly positive linear correlation between two variables. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. While the S&P 500 is just now officially in a correction, some stock market segments have been in one for months. ORC likely has a substantially higher downside risk than Annaly between the two. The most obvious advantage, and one thats particularly attractive currently, is income. Big dividend yields aren't always what they seem even though they tend to attract a lot of investor attention. Problematically, the huge ~1% rise in the one-year Treasury rate will soon force many of these companies to pay much higher monthly interest expenses. But there's another trend that is even more telling and doesn't require much research to understand. What Is The Ownership Structure Like For Orchid Island Capital - Nasdaq This issue is known as "spread risk" and is the primary culprit for the recent string of declines in mortgage REITs. 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. Generally speaking, investing in blue-chip stocks that pay monthly dividends has several advantages. Does it continually go up, or has it declined or stayed flat over the years? The Motley Fool has a disclosure policy. I wrote this article myself, and it expresses my own opinions. Total Stockholders Equity (as of 3/31/2023), ir@orchidislandcapital.com
Why Invest. A high payout ratio might seem great on its face, but when it's too high -- in the case of REITs that would be 100% or more -- then it's a problem. But there is little improvement in tangible book value and operation income has not fully recovered either. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Orchid Island Capital Alerts Stockholders to Dividend Payment Issue 7 Blue-Chip Stocks That Pay You Monthly Dividends, 10 Monthly Dividend Stocks with Over 5% Yield, individual investors who own 60% along with institutions invested in Orchid Island Capital, Inc. (NYSE:ORC) saw increase in their holdings value last week. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Since then, price has recovered by quite a bit and is close to the pre-pandemic level. 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 . Seeking Alpha's Disclosure: Past performance is no guarantee of future results. To put things in perspective, the dividend cost is about $60M so far in 2021. Those dividends al, In this article, we discuss 10 monthly dividend stocks with over 5% yield. For starters, leverage can enhance returns on the upside, but it can also increase losses when things don't work out as planned. The company decreased its RMBS portfolio in the last quarter which boosted its book value but this was only a temporary solution. 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. The high-interest rates, 20-year high mortgage rates, and inverted yield curves had and still have negative effects on mREITs profit margin and net interest income. Watch the BMNM earnings release. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The liquidation of a significant portion of TBV shrank its income generation capability. With questionable fundamentals and a mortgage market that is not expected to improve much (if at all) in 2020, Orchid Island may have a hard time getting things moving in the right direction. This score is calculated as an average of sentiment of articles about the company over the last seven days and ranges from 2 (good news) to -2 (bad news). When it is 0, it indicates that there is correlation between two variables (in this case, yield spread and return, respectively). Back up the truck. Not to mention higher demand for its specified pools as they are included in the Bloomberg MBS indices this year. Calculated by Time-Weighted Return since 2002. Annaly and AGNC both saw their book values decline in the third quarter. The money they make is derived from the spread (or, more simply, the difference) between the interest they earn and their cost of capital. At least, free lunches that are lasting and dependable. destenlee 2 yr. ago. Operation income shrank from about $94M per-pandemic to about $55M in 2020, a 42% drop. Good Luck. As of their last reports, neither own mortgage-servicing rights, which can partially hedge mortgage spread risks. ORC is quite oft mentioned. A look at the shareholders of Orchid Island Capital, Inc. ( NYSE:ORC ) can tell us which group is most powerful. If earnings go down they will look at cutting. The company lowered its dividend numerous times in the last 10 years and the management is not keen on providing stable and secure dividends. When the spread between short-term rates and long-term rates compresses, profitability erodes at a rapid pace. Orchid Island Capital, Inc. (NYSE:ORC) . That's not a trajectory that investors want to see. I am not receiving compensation for it (other than from Seeking Alpha). 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. The only year in which it didn't decrease was 2017, but staying the same for two years running, given the longer-term downtrend, is not a cause for celebration. The first line of the REIT's corporate overview is very clear: "Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities on a leveraged basis." Lees ons privacybeleid en cookiebeleid voor meer informatie over hoe we je persoonlijke gegevens gebruiken. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. How much is the dividend? Orchid Island Capital shareholders who own ORC stock before this date will receive Orchid Island Capital's next dividend payment of $0.1600 per share on 2023-07-27. The stock is down quite substantially from its 2021 highs and has seen some accelerating losses lately, so it seems like a good time to take a closer look at ORC and the mREIT market as a whole. The TBV that the author is so concerned about is result of the pandemic and its emotional effects. Admittedly, it can be a complex business. A traditional REIT owns physical property and leases it out to tenants. 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. The fourth quarter saw a decline of $3.7 million in interest income compared to previous quarters. 772-231-1400. Cue the next dividend cut Is anyone buying at this level? Despite the Federal Reserves seven consecutive rate hikes this year, November inflation data were slightly hotter than expected, rejuvenating investors fears. Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. The next chart shows the yield spread of ORC relative to Moody's Seasoned BAA Corporate Bond Yield. As of this writing, the yield spread relative to BAA is 12.6% as shown, close to the thin end of the historical spectrum, again suggesting that it was not a good entry opportunity for short-term market timers (at least relative to a high yield bond index such as BAA corporate bond). I also have a dividend-focused portfolio with an investment horizon of 15 to 25 years. I covered ORC last in 2020 in "Orchid Island: Shuttering Mortgage Market Signals Potential Bearish Move." 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. Put simply, do you want a 20% dividend if it's nearly certain that your asset's value will decline more than 20% per year? ORC's ex-dividend date. Net interest income dropped $13.6 million, while net portfolio losses fell $19.4 million. To illustrate, note the inverse correlation between REM and the spread between mortgages and Treasuries: When the spread spiked in the early 2020s on fears of a banking crisis, many mREITs declined substantially, and a few never recovered. I am not receiving compensation for it (other than from Seeking Alpha). VERO BEACH, Fla., September 29, 2022--Orchid Island Capital, Inc. (the "Company") (NYSE: ORC) has become aware of an issue with stockholders of record of the Company's common stock on August 31 . To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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. The earnings call had a tell for you Texas Holdem players. Is Invesco KBW High Dividend Yield Financial ETF (KBWD) a Strong ETF Right Now? At this point, the price movement has been far ahead of the fundamentals. The fourth quarter results brought some relief as they outperformed expectations. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. But Orchid Island's dividend payout still remains below the split-adjusted monthly dividend it was paying before 2021. Sie knnen Ihre Einstellungen jederzeit ndern, indem Sie auf unseren Websites und Apps auf den Link Datenschutz- und Cookie-Einstellungen oder Datenschutz-Dashboard klicken. 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. We were a little short in the fourth quarter, but that's just purely on an income basis. My entire rating history for the company is shown below: Harrison Schwartz Seeking Alpha Rating History For ORC (Seeking Alpha). seen their book values decline dramatically, and their cash-flows tighten. Price / Book (TTM): 0.83. I have no business relationship with any company whose stock is mentioned in this article. After Fed decision today of keeping short term rates in the near zero range and gradual tapering beginning soon I expect a nice ORC rally tomorrow. difficulties are not over yet. He was right. The company's largest shareholder is BlackRock, Inc., with ownership of 9.0% . Pundits to expect 7 or so .25bps rate increases this year? Stock Advisor list price is $199 per year. Today, the monthly dividend has grown to $0.065 per share. the percentage of the share price that's paid out annually? He has professional experience in the private equity, real estate, and economic research industry.