By How Much Will Chimera Investment Cut Its Q2 Dividend?

| About: Chimera Investment (CIM)
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Since its 2007 IPO, mortgage REIT Chimera Investment Corp. (NYSE:CIM) has - by almost all counts - been an investment failure. Now the company may be in the process of setting up the final chapter of investor disappointment.

Here is a timeline of the high and low points of the short history of Chimera Investment.

  • The initial IPO price in November 2007 was $15 per share. The stock now trades for $2.80, a decline of 81%.
  • After paying an initial dividend of 26 cents for the first quarter of 2008, the payout rapidly decreased to a low of 4 cents per share by the beginning of 2009. The share price - which peaked close to $19 soon after the IPO, dropped to $2.60 by the fourth quarter of 2008.
  • Chimera rebuilt the dividend rate, getting the quarterly distribution back up to 17 cents per share at the end of 2009 and it remained at that level - one 18 cent dividend was paid - until the final dividend of 2010.
  • The share price recovered to about $4.30 in early 2011.
  • Throughout 2011 and into the first quarter of 2012 the dividend steadily declined to 11 cents per share and the share price has dropped by 35% from the early 2011 high.

Now, on June 1, 2012, Chimera Investment Corp. has not yet filed the required 2011 year-end 10-K annual report with the SEC. The SEC rules require the filing of the annual 10-K within 60 days of the end of a company's fiscal year. Chimera announced on March 15 that it would be late filing the annual 10-K and the first quarter 10-Q reports. As of the first of June, Chimera Investment's required annual filing is 90 days late. Failure to file the required 10-K and 10-Q reports can lead to hefty fines from the SEC and eventual delisting from the stock exchange. However, those are distant possibilities as long as Chimera stays in contact with the regulators and exchange. The NYSE generally does not start to consider delisting a stock until a required filing is 9 months overdue.

On the more current front, Chimera typically announces the second quarter dividend amount and payment dates in early June. Since the company has not yet filed the required 2011 annual report and 2012 first quarter SEC 10-Q report, it is unclear whether Chimera is in a position to pay a second quarter dividend. Possibilities include declaring and paying a regular dividend, paying a significantly reduced dividend or skipping the second quarter distribution. It seems likely that a company that is three months overdue in filing required SEC reports may have enough questions about its financial situation that disbursing cash through a dividend payment may not be a prudent action.

The Chimera Investment mortgage portfolio is managed by a division of Annaly Capital Management (NYSE:NLY). To date, Annaly Capital has not commented on its business with Chimera Investment. The guess here is that Chimera Investment will declare an 8 or 9 cent quarterly dividend to keep investors from bailing out entirely on the stock.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.