On November 15, 2012, CYS Investments, Inc. (CYS) announced a major $250 million stock repurchase program. CYS's closing price for that day was $11.78. As shown in my previous article, CYS was trading at a major discount to its net asset value. This is a major development since that amount would be able to purchase 12% of the total amount of shares outstanding, or about 21 million shares. This should provide a floor to its share price.
Below is an excerpt from the press release:
NEW YORK--(BUSINESS WIRE)--Nov. 15, 2012-- CYS Investments, Inc. (the "Company") today announced that its Board of Directors has authorized the repurchase of shares of the Company's common stock having an aggregate value of up to $250 million.
CYS shares reacted positively to the news, soaring nearly 5% November 16 to $12.32.
CYS joins other Agency REITs in announcing share repurchases. On October 16, 2012 Annaly Capital (NLY) announced a $1.5 billion share repurchase program. On October 29, 2012 American Capital Agency Corp. (AGNC) announced a $500 million share program. CYS is still undervalued compared to its peers. CYS trades at a 15% discount to NAV. This is compared with a 6% discount for AGNC and a 11% discount for NLY.
CYS has historically never traded at such a discount to its net asset value. It has averaged a 2% premium to net asset value over the last 8 quarters. A 15% discount to its NAV is well below its historical trend.
At current prices, CYS offers a 14.65% yield. Even with Friday's run up, CYS is still undervalued.
Disclosure: I am long CYS.