On Monday, March 26, 2012, after the markets closed, Hatteras Financial (NYSE:HTS) announced a secondary public offering of 15 million shares of its common stock, with a 30-day option to purchase up to an additional 2.25 million shares to cover overallotments.
The last time Hatteras announced a secondary stock offering was on March 17, 2011, or just about 1 year ago, and also just after going ex-dividend. Prior to that Hatteras also announced a secondary at the start of 2011, on January 4, and also one on September 20, 2010.
Hatteras buys agency mortgages that are backed by federal agencies. Other well-known agency mREITs include American Capital Agency Corp (NASDAQ:AGNC) and Annaly Financial (NYSE:NLY). Index ETFs for mREITs include the FTSE NAREIT Mortgage REITs Index ETF (NYSEARCA:REM) and the Market Vectors Mortgage REIT Income ETF (NYSEARCA:MORT), though both of these ETFs also hold mREITs that invest in non-agency backed securities.
Hatteras just recent went ex-dividend. Hatteras presently pays out a $0.90 quarterly dividend. Secondary offerings following an ex-dividend are common among agency mREITs. For example, on March 7, AGNC announced a massive secondary for gross proceeds of about $2.0 billion.
On February 14, 2012, Hatteras reported Q4 2011 net income of $70.6 million, or $0.92 per share, compared to net income of $79.0 million, or $1.04 per share during Q3 3011. The results were in line with Wall Street expectations.
Hatteras also reported net interest margin decreased to 1.56% from 1.64% in the prior quarter. Their portfolio's weighted average coupon was 3.46% during Q4 of 2011, compared to 3.54% during Q3. The annualized yield declined to 2.60% in Q4 2011, compared to 2.72% in Q3 2011.
The company's repo debt-to-shareholders' equity leverage ratio was 7.8x, a slight decrease from 7.9x the prior quarter. Book value increased 2.89 percent to $27.08 per share.
Many investors prefer to enter mREITs following secondaries that follow ex-dividends, like this one. Such investors feel that by looking out for these secondary offerings, individual investors can buy high yield companies with the knowledge that institutional money and advised high net-worth investors are apparently buying in at the same price.
Of course, that does not mean it is a good investment, but only that you may be in good company. One should understand that HTS must now pay any future dividend to those new shares too, scaling up the size of the operation.
Shares of Hatteras were trading above $28 per share prior to the announcement of the secondary, but fell as low as $27.30 in after hours trading, or down about 2.65 percent, on news of the offering.
Disclosure: I am long NLY.