Skipping Preferred Share Dividend Captures For A Quarter

Seeking AlphaREITsSkipping Preferred Share Dividend Captures For A QuarterSep. 29, 2020 12:54 AM ET|| Includes: AGNC, AGNCB, AGNCM, AGNCN, AGNCO, AGNCP, ANH, ANH.PA, ANH.PB, ANH.PC, CIM, CIM.PA, CIM.PB, CIM.PC, CIM.PD, DX.PA, DX.PB, DX.PC, NLY, NLY.PD, NLY.PF, NLY.PG, NLY.PI, NYMT, NYMTM, NYMTN, NYMTO, NYMTP, PFF, PMT, PMT.PA, PMT.PB, TWO, TWO.PA, TWO.PB, TWO.PC, TWO.PD, TWO.PEby: Colorado Wealth Management FundColorado Wealth Management Fund The REIT ForumThe #1 REIT Service Measured By Total ReturnsSummaryOver the last several years, we have often had great opportunities to highlight for preferred share dividend captures.
A "dividend capture" should be impossible in an efficient market. Under efficient markets, the preferred share price should fall by the amount of the dividend.
In practice, we've often found opportunities where we believed the share price was likely to fall by materially less than the dividend.
There is no way to "prove" something is a great opportunity in advance, but the choices usually worked well. This quarter, we don't get the same great setup.
Today, there are many great opportunities for investors in the preferred shares if they are comfortable with the idea of holding for longer time periods.
Some quarters, we use dividend captures (generally in tax-advantaged accounts) to take advantage of shares often falling by less than the ex-dividend amount. However, we don’t plan to do them in Q3 2020. Why? Because preferred shares which already went ex-dividend have generally underperformed their peers over the last several weeks. Examples include:
The preferred shares from Annaly Capital Management (NLY) underperforming versus the preferred shares from AGNC Investment Corp. (AGNC). Preferred shares from Chimera Investment Corporation (CIM) and PennyMac Mortgage Investment Trust (PMT) underperforming preferred shares from Anworth Mortgage Asset Corp. (ANH) and slightly underperforming preferred shares from... Read more