Update: My Reaction To Chimera Investment Corporation's Dividend Payment

| About: Chimera Investment (CIM)
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Summary

Chimera has announced its latest dividends.

I predicted the dividend would be maintained, if not raised.

I offer my thoughts on the dividend, why I continue to like the company, and what I expect for Q4.

Chimera Investment Corporation (NYSE:CIM) has announced its latest dividend payment. The Board of Directors of Chimera announced that its fourth-quarter 2014 cash dividend will be $0.09 per common share. This dividend is in line with the prior quarter's payment. At the present share price of $3.23, the stock now yields 10.7%. This dividend is payable January 29, 2015, to common shareholders of record today, December 31, 2014. The ex-dividend date was December 29, 2014.

When I last covered Chimera in depth, I covered its industry leading net interest rate spread and stable book value. I predicted a good third quarter and feel that my expectations were met. I opined how I was also pleased with the dividend being maintained, and the fact that it is easily being covered by earnings and suspected this trend to continue. I assigned a buy rating on the stock and a $3.25 price target, and continue to feel good about that call. I also predicted the dividend would be maintained, if not raised, and with the present announcement, we see that indeed it was maintained.

While I would have liked to have seen a dividend hike, it is probably more prudent to wait for a few more quarters of action on the side of management to see what happens. Of course, the company is required to pay out at least 90% of its taxable income as dividends, so if things keep improving, either a raise or a special dividend payout is inevitable. And I think things can remain strong, and I expect a good fourth quarter. While interest rates have trended a bit lower, they have been relatively stable. Further, the company nearly quadrupled its income quarter-over-quarter. Chimera reported net income of $378 million, or $0.37 per average share, as compared to $67 million, or $0.07 per average share, last year, and was up from $105 million, or $0.10 per share, last quarter. Core earnings were $116 million, or $0.11 per share, for the quarter to $93 million, or $0.09 per share, for the quarter ended September 30, 2013. These earnings easily covered the quarterly dividend, as Chimera paid a common stock dividend of $0.09 per share for the quarter. I expect core income to exceed the dividend once again. The company also still trades at a 5% discount-to-book. Under $3.25, I want to be a buyer.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.