Seeking Alpha
Momentum, special situations
Profile| Send Message|
( followers)  

Yes, the RAIT Financial Trust (NYSE:RAS) boosted the quarterly dividend rate again. It's the 4th such increase in a row and the 5th in the last six quarters. The penny a share increase to 13 cents lifts the annualized rate to 52 cents. In my first article on the subject company last November, I wrote that the quarterly rate could increase from the then current rate of nine cents to 15 cents by the end of 2013. Well, it looks like that estimate will be achieved. With the stock priced at $7.11, the current indicated dividend yield is 7.3%. And if the quarterly rate goes to 15 cents in Q4, the yield would be 8.4%. The stock goes ex-dividend on the 10th of July.

Furthermore, my estimate of an increase in the quarterly rate to 18 cents by Q4 of 2014 still applies. So, the indicated annual rate of 72 cents would equate to a dividend yield of 10.1%.

Friday's close was $7.50 and I bought stock this morning on a low-ball bid of $7.11. The stock was trading at $7.39 when I entered the bid. Now I'll tell you why I bought shares at this time.

Luck is the thing that happens when preparation meets opportunity. What Ben Bernanke said, about the Fed's QE policies at his news conference on Wednesday the 19th of June, spooked the markets. Interest rates spiked and stock and bond markets went into a tailspin. Indiscriminate selling is going on and good stocks are being dragged down with stocks that aren't so good.

Well, I got lucky. In my article "Make Hay While the Sun Shines" (Feb. 24) I was critical of Fed policies and even recounted historical precedent and referred to well established economic theory in support of my criticism. I concluded that "interest rates would rise sharply" and even stated that "it is likely that the Fed's balance sheet and high interest rates will hang over the economy like a Damocles' Sword." Therefore, I was "prepared" for something like Bernanke's revelation. So when it occurred, I was not surprised by it as so many investors were who are now dumping stocks.

I also wrote an article on the 10th of June "RAIT's Turnaround Revised" and nothing has occurred to change my bullish opinion on the company. I will not detail here what I wrote then because to do so would be redundant. Interested readers can refer to it if they so choose.

In that article I wrote (1) "Although I would like to be an aggressive buyer of more shares if and when the negative technical situation on the chart on RAS turns positive, I would not hold on to a "full" position in the stock at this time because of weak technical indicators as they relate to both RAS and the general market." (2) "The price action in the general market during the past 13 trading days shows that a lot of technical damage has been done to the market as a whole and it is likely that the "correction" will have to be completed before a broad-based advance can be sustained." And (3) "Nevertheless, while it would be prudent to be cautious while managing one's investments at this time, the best time to accumulate shares is during a period of market weakness. And, that is what I intend to do."

I repeat: luck is the thing that happens when preparation meets opportunity. I have never been more prepared to make a buy decision on a stock than I am at this time. If I can't pull the trigger and buy the stock under circumstances I fully understand, that will be a failure of nerve. I could never succumb to that. I bought shares on a low-ball bid today and I will try to do so again in the days ahead

Source: RAIT Did It Again