Some useful information from another discord. Slowly easing into this in my boomer port. Some of this is a bit over my head, so posting it here for big brains to digest.
rates cut to 0% or stay the same before call protection expires? RITM-D is yielding over 10%, trades at a stripped discount of 31% to par, and has an annualized yield to call of over 16%, with call protection until Nov 2026.
rates rise before call protection expires? RITM-D position can be “laddered into” and will have it’s spread “reset” in Nov 2026 to capture the new, higher yields.
call protection expired, shares not called, and rates stay the same or increase? RITM-D will have it’s spread “reset” in Nov 2026 to capture the new, higher yields.
call protection expired, shares not called, and rates are cut to 0%? RITM-D has highest base rate + highest spread reference benchmark. In all historical scenarios, the share yields more after call protection expires than before.
RITM-D skips a dividend? Any unpaid dividends shall accrue and are to be paid before any common dividends are paid. Since this is a company subject to REIT tax mechanics, any pauses are either promptly resumed or the company goes bust; no intermediate option exists.
RITM-D gets margin called? The ratio of shareholder equity to pfd equity is over 4.5x - lots of buffer before pfds start to take heat. Also pfds are trading at 31% discount to par, so in the event of liquidation as opposed to acquisition, partial recovery of 69 cents on the dollar yields a full recovery.
RITM-D suffers a material loss in book value or revenue generating capacity? Pfd distributions represent under 11% of EPS, so company would need to suffer nearly a 90% reduction in earnings before div is at risk of non-payment.
RITM-D is in the mREIT space which is subject to yield drama? RITM is primarily in the business of collecting mortgage payments and sending them to investors while collecting a fee for the service. They’re the middle men and largely not affected by bond stresses.