Two REITs that were new picks for Singer were American Capital Agency Corp. (NASDAQ:AGNC) and Chimera Investment Corporation (NYSE:CIM). Both stocks sport very high dividend yields in a rate-starved environment; American Capital pays a dividend that yields 15.8% and Chimera pays a 13.1% yield. Right behind Singer in the list of American Capital fund owners was fellow billionaire Jim Simons, who added a position of two million shares last quarter (see all Simons’ new picks).
American Capital trades in the mid-range of the industry at 10x earnings, but has enough cash on hand, with $2.6 billion as of 3Q, to fund its yearly dividend that amounts close to $1.7 billion. American Capital also has a relatively low beta of only 0.5 but is up 12.5% year to date compared to the Dow Jones Industrial Average’s only 7%, meaning that there’s surprisingly a lot of pop in this REIT.
Chimera trades at the low end of its industry at only 5x earnings, but we remain fairly cautious on calling the REIT a value play and believe it might be a value trap, so to speak. The company has a mere $10 million of cash on hand, while paying a yearly dividend that amounts to over $360 million. Despite this shortfall, another big fan of Chimera during 3Q was billionaire D.E. Shaw, whose firm took a new position that was nearly double that of Singer’s, at 15.6 million shares (check out all of Shaw’s new stock picks).
To recap: Singer’s two European telecom companies will see continued weaknesses in their domestic operations, but have international opportunities that will help to prop up each in the interim. Reed sports a much lower dividend yield, while Singer’s two new REITs have yields that are very intriguing to investors, though it appears that American Capital is the better investment of the duo.
