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Resource Capital: A Quick Trade To Boost Yields On Idle Cash

Sam Lin, CFA, CPA profile picture
Sam Lin, CFA, CPA


  • Many investors are holding sizable cash positions which generate little to no return.
  • Resource Capital's preferred stock redemption offers an opportunity to juice yields with little time commitment.
  • Make 3-10% annualized return in 20 days.

Many cautious investors have trimmed equity market exposure during the euphoric run-up earlier this year. Agile traders were able to snag up bargains with their dry powder during the early February sell-off, but the short-lived correction likely left many still holding a sizable cash position. The market still feels expensive at close to all-time highs, the tech growth stories look fully-priced, and allocating to fixed income seems like a bad bet against the rising rate backdrop. I am one of these investors holding a larger-than-desired cash position, but hesitant to deploy capital due to the lack of bargain in the markets. One of my solutions is to look for short maturity income situations to boost my portfolio yield without sacrificing liquidity.

The Opportunity

Resource Capital Corporation’s (RSO) Series B preferred stock offers an attractive opportunity to put idle cash to work, and juice your yield with a short holding period of 20 days.

Resource Capital Corp is in the midst of a turnaround, where management is working to lower cost of capital while simplifying the core business. As part of this strategic initiative, they have been refinancing high cost capital via redemption of preferred stocks and bonds and re-issuing at lower rates. I am bullish on the common stock and have recently written about the company here and here.

Resource Capital announced the redemption of their series B preferred stock, which will take place on March 26, 2018. Holders of the preferred stocks will be paid the par value of $25.00, plus accrued dividend of $0.32083, for a total of $25.32083 on the redemption date.

Price Paid $ 25.26 $ 25.27 $ 25.28 $ 25.29 $ 25.30
Return 0.24% 0.20% 0.16% 0.12% 0.08%
Annualized Return 7.2% 6.0% 4.8% 3.7% 2.5%

At the time of writing, the bid

This article was written by

Sam Lin, CFA, CPA profile picture
MBA from UCLA Anderson, CFA charterholder and California-licensed CPA currently working for a global top-20 asset manager in Hong Kong. Los Angeles roots and bilingual Mandarin. I previously worked for a fund of hedge fund and have some accounting experience in the entertainment industry.I have been investing since October 2008. My initial investment focus was on REITs and other income stocks but have since expanded my universe to include any value situation. I believe income and capital appreciation are not mutually exclusive.I enjoy reading fact-based fundamental analysis and shun emotional arguments. Starting in July 2017, I aim to publish one article a week on a new company, focusing first on macro and qualitative factors and will selectively dive deeper into valuation on some names. I usually do not publish price targets in my articles except for special situations and event-driven ideas. I believe relative valuation and a strategic view add more value than a single number. There are simply too many variables (beta, economy, interest rates, geopolitical risks) impacting the overall market, and it would be naive of me to think I can account for all of them.

Analyst’s Disclosure: I am/we are long RSO, RSO/PB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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