Cherry Hill Mortgage's Dividend Sustainability Analysis (Includes Q2-Q4 2019 Dividend Projection And Recommendation)

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About: Cherry Hill Mortgage Investment Corporation (CHMI), Includes: AGNC, ARR, GPMT, IVR, MITT, NLY, NRZ, NYMT, NYMTN, ORC, REM, TWO, TWO.PB
by: Scott Kennedy
Summary

This article analyzes CHMI’s dividend sustainability through the end of 2019 by providing taxation metrics based on recent and projected quarterly results.

I believe this analysis has a heightened level of importance due to recent trends within the mREIT sector (mainly AGNC’s and NLY’s recently announced dividend decrease).

Test 1 analyzes CHMI’s quarterly estimated core earnings while Test 2 analyzes the company’s cumulative undistributed taxable income.

This article also provides direct, factual evidence as to why CHMI declared a special periodic dividend during the fourth quarter of 2016 and 2018.

My projected CHMI dividend per share rate for Q2-Q4 2019 and buy, sell, or hold recommendation are stated in the “Conclusions Drawn” section of the article.

Focus of Article:

The focus of this article is to provide a detailed analysis with supporting documentation on the “most probable/suitable” quarterly dividend per share rate Cherry Hill Mortgage Investment Corp. (CHMI) will/should declare for the remainder of 2019 (Q2-Q4 2019). I decided to cover this topic due to the number of readers who have specifically requested such an analysis be specifically performed on CHMI in light of recent sector earnings. For readers who just want the summarized conclusions/results, I would suggest to scroll down to the “Conclusions Drawn” section near the bottom of the article.

Understanding the tax and dividend payout characteristics of CHMI will provide investors with an overall better understanding of the mortgage real estate investment trust (mREIT) sector as a whole. Due to the fact CHMI has produced an annualized dividend yield of at least 10% since the company’s initial public offering (“IPO”) in 2013, many investors have chosen this stock (and other sector peers) for an income-producing equity investment. From reading this article, investors will better understand how a qualified real estate investment trust (“REIT”) per the Internal Revenue Code (“IRC”) comes up with an entity’s current dividend per share rate and specific signs when an increase or decrease should be implemented.

I will be performing two dividend sustainability tests within this article. These tests will be termed “TEST 1” and “TEST 2”. At the end of this article, there will be a conclusion regarding my personal projection of CHMI’s dividend per share rate for the second-fourth quarters of 2019 and the probability of another special periodic dividend in 2019. I will also include my BUY, SELL, or HOLD recommendation and current price target on CHMI.

Estimated Core Earnings (“ECE”) Overview:

Before we begin CHMI’s dividend sustainability and projection analysis, let us briefly get accustomed to the information provided in Table 1 below. CHMI does not provide a table that is comparable to Table 1. Table 1 below shows CHMI’s annual ECE from 2015-2018 and the company’s ECE for the first quarter of 2019. All figures within Table 1, with the exception of the first numeric column, are for the “twelve-months ended” (annual) timeframe.

Table 1 – CHMI ECE Analysis (2015-2018 + Q1 2019)

CHMI ECE Analysis (Source: Table created entirely by myself, partially using CHMI data obtained from the SEC’s EDGAR Database)

The quarterly net income (loss) figures shown in Table 1 above are derived from CHMI’s income statement (technically speaking, the company’s “consolidated statement of income (loss)”; see red reference “A”). In order for CHMI to come up with a proper ECE amount, there are specific Generally Accepted Accounting Principles (“GAAP”) to IRC adjustments (reversals) that need to be performed each quarter. Income and expense recognition of certain accounting transactions differ between GAAP and the IRC (book versus tax accounting treatments; see red reference “B”). Also, one needs to be mindful of any capital loss carryforward regarding mortgage-backed securities (“MBS”)/investments and deferred gains (losses) on derivative instruments that may have arisen from prior tax years (topics/calculations beyond a “free to the public” article; have provided such detailed topics in prior mREIT dividend sustainability analyzes).

After accounting for CHMI’s book versus tax reversals from net income (loss), one can now calculate the company’s ECE amount (see red reference “C”). Once this is complete, one needs to account for CHMI’s preferred stock dividends and the allocated portion of income (loss) attributable to noncontrolling interests (see red reference “D”). After this accounted for, CHMI’s ECE for common shareholders figure is known (see red reference “E”). Due to the specific IRC provision stating an entity must distribute at least 90% of its annual REIT taxable income (“AREITTI”) to retain the company’s qualified REIT status, ECE is an important indicator regarding minimum annual distribution requirements (“ADR”). This excludes the notion of an entity’s ability to use what is known as the spillback provision.

Now let us perform CHMI’s dividend sustainability and projection analysis. This will be a good general indicator of CHMI’s dividend sustainability over the foreseeable future (rest of 2019); including whether a dividend increase or decrease should eventually come to fruition. This will also provide direct, factual evidence as to why CHMI has not needed to reduce the company’s dividend over the past several years (which I previously correctly projected).

Side Note: Some mREIT peers typically utilize to-be-announced (“TBA”) MBS as a material part of a company’s investment strategy. Companies can enter into TBA contracts with a long position where management agrees to buy, for future delivery, MBS with certain predetermined prices, face amounts, issuers, coupons, and stated maturities. Companies enter into TBA contracts with a long position as an off-balance sheet means of investing in and financing MBS. Companies can also enter into TBA contracts with a (short) position where management agrees to sell, for future delivery, MBS with certain predetermined prices, face amounts, issuers, coupons, and stated maturities. Even though CHMI does utilize this type of derivative instrument during most quarters, the company typically has a very small TBA MBS position. As such, CHMI typically generates minimal net dollar roll (“NDR”) income (loss). As such, I have determined I am excluding this specific metric within CHMI’s dividend sustainability analysis. Technically speaking, when a capital loss carryforward exists, NDR income (loss) is not a component of quarterly ECE and is accounted for as a decrease/an increase to an entity’s cost basis per the IRC.

TEST 1 – Quarterly/Annual ECE Versus Dividend Distributions Analysis:

To begin this analysis, Table 2 is provided below. Table 2 is an extension of the information provided in Table 1 above. Table 2 compares CHMI’s ECE to the company’s dividend distributions showing the quarterly/annual underpayment (overpayment).

Table 2 CHMI ECE Versus Distributions Analysis (2015–2018 + Q1 2019)

CHMI ECE Versus Distributions Analysis (Source: Table created entirely by myself, partially using CHMI data obtained from the SEC’s EDGAR Database [link provided below Table 1])

Using Table 2 above as a reference, I take CHMI's quarterly/annual "ECE - common shareholders" figure (see red reference "E") and subtract this amount by the quarterly/annual "distributions to shareholders from ECE" figure (see red reference "I"). If CHMI's red reference "E" is greater than the company’s red reference "I", then CHMI technically had enough ECE to pay out the company’s dividend distributions for a particular quarter/year. As such, any excess quarterly/annual ECE left over (after accounting for the dividend distributions) is added to CHMI’s cumulative undistributed taxable income (“UTI”) balance. If CHMI's red reference "E" is less than the company’s red reference "I", then CHMI had overpaid the company’s quarterly/annual dividend distributions and must use a portion of the remaining cumulative UTI balance (or add to the deficit balance within that year) to help pay for the overpayment.

TEST 1 - Analysis and Results:

Still using Table 2 as a reference, CHMI had annual ECE attributable to common shareholders of $14.7, $16.1, $25.5, and $33.0 million for 2015, 2016, 2017, and 2018, respectively. In comparison, CHMI had dividend distributions to common shareholders of ($14.9), ($15.9), ($22.4), and ($32.6) million, respectively. When calculated, CHMI had an underpayment (overpayment) of ECE attributable to common shareholders of ($0.2), $0.2, $3.1, and $0.4 million for 2015, 2016, 2017, and 2018, respectively (see red reference “J”). This calculates to an annual dividend distributions payout ratio of 101%, 99%, 88%, and 99%, respectively (see red reference “(I / E)”). As such, I believe it can be determined CHMI basically matched the company’s common stock dividend distributions to its ECE attributable to common shareholders for 2015, 2016, and 2018 while having a modest (payout ratio at or greater than 80% but less than 90%) underpayment during 2017.

However, I would point out that CHMI paid a special periodic dividend of $0.15 per common share during the fourth quarter of 2016 and 2018.In a nutshell, CHMI wanted to pay out, within the same tax year, the company’s ECE to avoid paying a larger excise tax on the portion of taxable income (“TI”) carried over to the following tax year. Over the past several years, CHMI has been the rare mREIT peer that has enough TI to pay out a special periodic dividend in not one, but two years. This is one top of the notion, over the past several years, CHMI’s stable $0.49 per common share dividend has remained near the mREIT sector average of a 10%-12% annualized yield. As such, these two special periodic dividends were an “add on” per se to CHMI’s overall annualized yields during 2016 and 2018.

Moving to 2019, CHMI had ECE attributable to common shareholders of $10.0 million for the first quarter of 2019. In comparison, CHMI had dividend distributions to common shareholders of ($8.2) million. When calculated, CHMI had an underpayment of ECE attributable to common shareholders of $1.2 million for the first quarter of 2019. This calculates to a quarterly dividend distributions payout ratio of 82%. As such, I believe it can be determined CHMI modestly underpaid the company’s ECE attributable to common shareholders during the first quarter of 2019.

When looking at TEST 1 on a “standalone” basis, I believe CHMI’s near matching of common stock dividend distributions to ECE attributable to common shareholders for 2015, 2016, and 2018 could be perceived as a “cautionary” trend regarding the company’s dividend sustainability. However, I also believe this general interpretation would be a preliminary “rush to judgment”. As stated above, I would stress to readers CHMI’s 2016 and 2018 payout ratio includes an extra $0.15 per common share of special periodic dividends that were distributed during each year. This is very important to understand. In addition, contrary to most agency mREIT peers, CHMI has not had a “return of capital” (“ROC”) distribution when it comes to the company’s 2016-2018 dividend.

Furthermore, CHMI had a modest underpayment of ECE attributable to common shareholders during 2017 when a special periodic dividend was not declared. More recently, when most sector peers had dividend distributions in excess of the company’s equivalent to ECE attributable to common shareholders, CHMI continued to have a modest underpayment for the first quarter of 2019 (82% payout ratio). I believe this has been a very positive catalyst/trend to consider. To take this dividend sustainability analysis a step further, let us now perform TEST 2.

TEST 2 – Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio Analysis:

To begin this analysis, Table 3 is provided below. Table 3 is an extension of the information provided in Table 2 above.

Table 3 CHMI Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio Analysis (2015–2018 + Q1 2019)

CHMI Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio Analysis (Source: Table created entirely by myself, partially using CHMI data obtained from the SEC’s EDGAR Database [link provided below Table 1])

Using Table 3 above as a reference, I take CHMI's "cumulative UTI” figure (see red reference “L") and divide this amount by the company’s "outstanding shares of common stock" figure (see red reference "F"). From this calculation, CHMI's "cumulative UTI coverage of outstanding shares of common stock ratio” is obtained (see red reference "(L / F)"). The higher this ratio is, the more positive the results regarding CHMI’s future dividend sustainability. Simply put, this ratio shows the amount of cumulative UTI covering the number of outstanding shares of common stock for that specified point in time. Since CHMI has continued to increase the company’s investment portfolio, mainly through periodic equity offerings, this ratio shows if the company has been able to increase its cumulative UTI balance by a similar proportion.

TEST 2 - Analysis and Results:

Still using Table 3 above as a reference, CHMI had a cumulative UTI balance of ($0.2) (which reverts back to $0 for the subsequent tax year), $0.2, $2.2, and $3.7 million at the end of the fourth quarter of 2015, 2016, 2017, and 2018, respectively. CHMI had 7.5, 7.5, 12.7, and 16.7 million outstanding shares of common stock, respectively. When calculated, CHMI had a cumulative UTI coverage of outstanding shares of common stock ratio of (0.02) (which reverts back to 0.00 for the subsequent tax year), 0.02, 0.17, and 0.22 at the end of the fourth quarter of 2015, 2016, 2017, and 2018, respectively.

Due to CHMI’s four-year underpayment of ECE attributable to common shareholders (as discussed in TEST 1 earlier), the company’s cumulative UTI balance increased from $0 as of 1/1/2015 to $3.7 million as of 12/31/2018. In my opinion, CHMI’s cumulative UTI balance as of 12/31/2018 was at a fairly attractive level (especially when compared to most mREIT peers who continued to have no cumulative UTI over the past several years; ROC distributions). In addition, I believe it was impressive CHMI has been able to gradually increase the company’s cumulative UTI balance while also distributing a special periodic dividend of $0.15 per common share during the fourth quarter of 2016 and 2018 (which most mREIT peers did not declare).

Moving to 2019, CHMI had a cumulative UTI balance of $5.5 million at the end of the first quarter of 2019. Due to CHMI’s quarterly underpayment of ECE attributable to common shareholders (as discussed in TEST 1 earlier), the company’s cumulative UTI balance increased from $3.7 million as of 12/31/2018 to $5.5 million as of 3/31/2019. CHMI had 16.7 million outstanding shares of common stock. When calculated, CHMI had a cumulative UTI coverage of outstanding shares of common stock ratio of 0.33 at the end of the first quarter of 2019. In my opinion, CHMI’s cumulative UTI balance as of 3/31/2019 was at an attractive level. This was also the highest cumulative UTI amount (and ratio) CHMI has had since the company’s IPO. This trend is in direct contrast to what most mREIT peers have recently experienced.

For the remainder of 2019, due to the general trend of rising prepayments and a decrease in the London Interbank Offered Rate (LIBOR; negatively impacts CHMI’s interest rate payer swaps), I am projecting the company will report quarterly ECE attributable to common shareholders of $0.50-$0.58 per share for the second, third, and fourth quarters of 2019. I believe a per share range is appropriate due to the fact there are many “moving parts” when it comes to projections within this particular sector. While this projected per common share range is less than CHMI’s reported ECE attributable to common shareholders of $0.60 for the first quarter of 2019, this range is still slightly-modestly above the company’s current quarterly dividend rate of $0.49 per common share.

Compared to what has occurred with some mREIT peers like AGNC Investment Corp. (AGNC), Annaly Capital Management Inc. (NLY), and Orchid Island Capital Inc. (ORC) who have recently had/will soon announce a modest-material dividend per share rate reduction, CHMI has continued to have sufficient ECE/TI for the company’s dividend distributions (with a surplus). This includes accounting for CHMI’s special periodic dividends. I believe this is an important, positive catalyst/trend for market participants to consider.

One of the key reasons for CHMI’s continued outperformance when it comes to dividend metrics (and overall returns) has been the company’s efficient mortgage servicing rights (“MSR”) portfolio. In a nutshell, this specific portfolio has continued to generate very attractive servicing income amounts while keeping servicing costs low. Even though I believe a near-term rise in prepayments will “tamp down” CHMI’s margins/net spreads within its MSR portfolio during the remainder of 2019, it should be noted there is amble room for margins/net spreads to decrease due to the company’s highly efficient business model/operating performance.

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support CHMI’s quarterly dividend per share rate over the past several years and over the foreseeable future. TEST 2 also supports CHMI’s special periodic dividends that were distributed during the fourth quarter of 2016 and 2018. I also believe TEST 2 supports the possibility of another special periodic dividend during 2019 or 2020.

Conclusions Drawn:

To sum up the information in this article, two dividend sustainability tests were performed on CHMI. The first test was based on CHMI’s ECE while the second test was based on the company’s cumulative UTI balance which are based on IRC methodologies. TEST1 provided the following information in regards to CHMI’s ECE payout ratio for 2015, 2016, 2017, 2018, and the first quarter of 2019, respectively:

CHMI’s 2015, 2016, 2017, and 2018 ECE Payout Ratio: 101%, 99%, 88%, and 99%

CHMI’s Q1 2019 ECE Payout Ratio: 82%

When looking at TEST 1 on a standalone basis, I believe CHMI’s near matching of common stock dividend distributions to ECE attributable to common shareholders for 2015, 2016, and 2018 could be perceived as a cautionary trend regarding the company’s dividend sustainability. However, I also believe this general interpretation would be a preliminary rush to judgment. I would stress to readers CHMI’s 2016 and 2018 payout ratio includes an extra $0.15 per common share of special periodic dividends that were distributed during each year. This is very important to understand. I am also projecting an ECE payout ratio of 85%-98% for the second, third, and fourth quarters of 2019 which equates to a minor-modest underpayment of ECE.

To gain further clarity, TEST 2 was then performed which analyzed CHMI’s cumulative UTI balance. TEST 2 provided the following information in regards to CHMI’s cumulative UTI coverage of outstanding shares of common stock ratio at the end of 2015, 2016, 2017, 2018, and the first quarter of 2019, respectively:

CHMI’s Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 12/31/2015, 12/31/2016, 12/31/2017, and 12/31/2018: (0.02), 0.02, 0.17, and 0.22

CHMI’s Cumulative UTI Coverage of Outstanding Shares of Common Stock Ratio as of 3/31/2019: 0.33

In my opinion, considering TEST 2 on a standalone basis, the evidence provided above helps support CHMI’s quarterly dividend per share rate over the past several years and over the foreseeable future. TEST 2 also supports CHMI’s special periodic dividends that were distributed during the fourth quarter of 2016 and 2018. I also believe TEST 2 supports the possibility of another special periodic dividend during 2019 or 2020.

When looking at the results from TEST 1 and TEST 2, I have concluded the probability of CHMI being able to maintain the company’s quarterly dividend per share rate through, at least, the end of 2019 is high (80%). As such, I am projecting CHMI will declare the following quarterly dividends for the remainder of 2019:

Dividend for Q2-Q4 2019: $0.49 per common share (80% probability)

I have also concluded the probability of CHMI being able to declare an annual special periodic dividend during 2019is modest (50%).As such, I am projecting CHMI may declare the following special periodic dividend during 2019:

Special Periodic Dividend for 2019 (Likely to Be Distributed in Q4 2019): $0.05-$0.15 per share (50% probability)

The amount and timing of CHMI’s special periodic dividend is directly impacted by the amount of the company’s cumulative UTI balance as 2019 progresses.

My BUY, SELL, or HOLD Recommendation:

From the analysis provided above, including additional catalysts/factors not discussed within this article, I currently rate CHMI as a SELL when I believe the company’s stock price is trading at or greater than a 5% premium to my projected CURRENT BV (BV as of 6/1/2019; $16.90 per share), a HOLD when trading at less than a 5% premium through less than a (2.5%) discount to my projected CURRENT BV, and a BUY when trading at or greater than a (2.5%) discount to my projected CURRENT BV. My BUY range is a slight improvement when compared to my last CHMI article (approximately two months ago).

Therefore, I currently rate CHMI as a BUY. As such, I currently believe CHMI is undervalued. My current price target for CHMI is approximately $17.75 per share. This is currently the price where my recommendation would change to a SELL. The current price where my recommendation would change to a HOLD is approximately $16.50 per share.

Along with the data presented within this article, this recommendation considers the following mREIT catalysts/factors: 1) projected future MBS price movements; 2) projected future derivative valuations; and 3) projected near-term dividend per share rates. This recommendation also considers the recent four Federal (“Fed”) Funds Rate increases by the Federal Open Market Committee (“FOMC”) during 2018 (this was a more hawkish tone/rhetoric when compared to most of 2017) and the more recent dovish tone/rhetoric regarding overall monetary policy due to recent macroeconomic trends/events. This also considers the wind-down/decrease of the Fed’s balance sheet through gradual runoff/partial non-reinvestment (which began in October 2017 which has increased spread/basis risk) and the recent announcement of “easing” of this wind-down starting in May 2019 regarding U.S. Treasuries and September 2019 regarding agency MBS (which should partially reduce spread/basis risk over time).

Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal recommendation will not fit each reader’s current investing strategy. The factual information provided within this article is intended to help assist readers when it comes to investing strategies/decisions.

Current/Recent mREIT Sector Stock Disclosures:

On 6/29/2017, I initiated a position in CHMI at a weighted average purchase price of $18.425 per share. On 10/6/2017, 10/26/2017, 11/6/2017, 1/29/2018, 10/12/2018, and 6/6/2019 I increased my position in CHMI at a weighted average purchase price of $18.015, $18.245, $17.71, $17.145, $17.235, and $16.315 per share, respectively. When combined, my CHMI position has a weighted average purchase price of $17.033 per share. This weighted average per share price excludes all dividends received/reinvested. Each CHMI trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha.

On 8/31/2017, I initiated a position in CHMI’s Series A preferred stock, (CHMI.PA). On 9/12/2017, I increased my position in CHMI-A. When combined, my CHMI-A position has a weighted average purchase price of $25.198 per share. Each CHMI-A trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on CHMI.PA.

On 1/31/2017, I initiated a position in New Residential Investment Corp. (NRZ) at a weighted average purchase price of $15.10 per share. On 6/29/2017, 7/7/2017, and 12/21/2018, I increased my position in NRZ at a weighted average purchase price of $15.775, $15.18, and $14.475 per share, respectively. When combined, my NRZ position has a weighted average purchase price of $14.912 per share. This weighted average per share price excludes all dividends received/reinvested. Each NRZ trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on NRZ.

On 8/23/2017, I initiated a position in Two Harbors Investment Corp.’s (TWO) Series B preferred stock, (TWO.PB). On 8/24/2017, I increased my position in TWO.PB. When combined, my TWO.PB position had a weighted average purchase price of $25.283 per share. On 4/1/2019 and 4/2/2019, I sold my entire position in TWO.PB at a weighted average sales price of $25.635 per share. Each TWO-B trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha.

On 1/29/2018, I initiated a position in TWO at a weighted average purchase price of $15.155 per share. On 4/17/2019, I increased my position in TWO at a weighted average purchase price of $13.165 per share. When combined, my TWO position has a weighted average purchase price of $13.825 per share. This weighted average per share price excludes all dividends received/reinvested. Each TWO trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on TWO.

On 3/8/2018, I initiated a position in New York Mortgage Trust, Inc.’s (NYMT) Series D preferred stock, (NYMTN). On 4/6/2018, 4/27/2018, 10/12/2018, 12/7/2018, 12/18/2018, and 12/21/2018 I increased my position in NYMTN. When combined, my NYMTN position has a weighted average purchase price of $22.379 per share. This weighted average per share price excludes all dividends received/reinvested. Each NYMTN trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on NYMTN.

On 10/12/2018, I initiated a position in Granite Point Mortgage Trust, Inc. (GPMT) at a weighted average purchase price of $18.155 per share. This weighted average per share price excludes all dividends received/reinvested. This GPMT trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on GPMT.

On 10/12/2018, I initiated a position in AG Mortgage Investment Trust Inc. (MITT) at a weighted average purchase price of $17.105 per share. On 4/17/2019 and 6/3/2019, I increased my position in MITT at a weighted average purchase price of $16.22 and $15.52 per share, respectively. When combined, my MITT position has a weighted average purchase price of $15.946 per share. This weighted average per share price excludes all dividends received/reinvested. Each MITT trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on MITT.

On 10/26/2018, I re-entered a position in ORC at a weighted average purchase price of $6.388 per share. On 12/18/2018 and 12/20/2018, I increased my position in ORC at a weighted average price of $6.215 and $5.845 per share, respectively. When combined, my ORC position had a weighted average purchase price of $5.992 per share. On 1/25/2019, I sold my entire position in ORC at a weighted average sales price of $7.027 per share as my price target, at the time, of $7.00 per share was met. This calculates to a non-annualized realized gain of 17.3% and a non-annualized total return (when including weighted average dividends received) of 19.1%. These ORC trades were disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a HOLD recommendation on ORC.

On 6/3/2019, I initiated a position in ARMOUR Residential REIT Inc. (ARR) at a weighted average purchase price of $17.545 per share. This weighted average per share price excludes all dividends received/reinvested. This ARR trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on ARR.

On 6/3/2019, I initiated a position in Invesco Mortgage Capital Inc. (IVR) at a weighted average purchase price of $15.49 per share. This weighted average per share price excludes all dividends received/reinvested. This IVR trade was disclosed to readers in real time (that day) via the StockTalks feature of Seeking Alpha. I currently have a BUY recommendation on IVR.

All trades/investments I have performed over the past several years have been disclosed to readers in real time (that day at the latest) via the StockTalks feature of Seeking Alpha (which cannot be changed/altered). Through this resource, readers can look up all my prior disclosures (buys/sells) regarding all companies I cover here at Seeking Alpha (see my profile page for a list of all stocks covered). Through StockTalk disclosures, at the end of May 2019 I had an unrealized/realized gain “success rate” of 87.5% and a total return (includes dividends received) success rate of 100% out of 40 total positions (updated monthly; multiple purchases/sales in one stock count as one overall position until fully closed out [no realized total losses]). I encourage other Seeking Alpha contributors to provide real time buy and sell updates for their readers which would ultimately lead to greater transparency/credibility.

Final Note: I am currently "teaming up" with Colorado Wealth Management to provide intra-quarter CURRENT BV per share projections on all 20 mREIT stocks I currently cover. This consists of weekly BV projections for all agency mREITs I cover (including ARR and ORC) and monthly BV projections for all hybrid/multipurpose mREITs. I also provide some commentary/overall thoughts on most mREITs' quarterly earnings. These very informative (and “premium”) projections are provided through Colorado's S.A. Marketplace service. This service will not impact my own real-time stock purchase and sale disclosures which I provide, for free, through the StockTalks feature of Seeking Alpha.

Disclosure: I am/we are long CHMI, CHMI.PA, ARR, GPMT, IVR, MITT, NRZ, NYMTN, TWO. 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.

Additional disclosure: I currently have no position in AGNC, MORL, NLY, NYMT, ORC, REM, or TWO.PB.