New Residential Investment And The Macro Credit Cycle

Feb. 11, 2022 1:43 AM ETRithm Capital Corp. (RITM) StockRITM48 Comments

Summary

  • With a 9.1% dividend yield, New Residential Investment Corp. appears attractive to many income-oriented investors, especially under a low-rate environment.
  • However, you need to understand the macro credit cycles before investing in NRZ, or mREITs in general.
  • NRZ makes money on the spread between the long-term and short-term rates and this spread is narrowing.
  • With Fed’s hawkish tapering and anticipated interest rate raises, the narrowing is expected to exacerbate and further pressure NRZ’s profitability.
  • Although it's a better positioned mREIT with its Caliber acquisition and lower-than-average leverage.
  • I do much more than just articles at Envision Early Retirement: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Thesis and Background

With a 9.1% dividend yield, New Residential Investment Corp. (NRZ) appears attractive to many income-oriented investors, especially under a low-rate environment. However, you need to understand the macro credit cycles and the role of

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This article was written by

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Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.

Sensor Unlimited contributes to the investing group Envision Early Retirement which is led by Sensor Unlimited. They offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request. Learn More.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

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