3 Things to Watch When CYS Investments and Hatteras Financial's Report Earningshttp://www.fool.com/investing/dividends-income/2014/07/21/what-investors-need-to-know-going-into-cys-investm.aspx Dave Koppenheffer
July 21, 2014
With CYS Investments (NYSE: CYS) reporting second quarter earnings later today, and Hatteras Financial (NYSE: HTS) following on Wednesday, investors have their second chance this year to take an inside look at the two companies.
Unfortunately, with so many of today's companies insistent use of industry jargon and complex metrics, attempting to decipher what is actually going on becomes pretty darn complicated. That's why I broke down the three of the most import things to watch:
All of which can be determined simply, if you know where to look.
1. Is the dividend safe?
Ultimately, with CYS and Hatteras paying a $0.32 and $0.50 dividend, respectively, investors should makes sure that each companies' core earnings can cover the dividend -- hopefully, with some wiggle room.
2. What's the spread?
The larger the spread, the greater potential for profits. So, investors should want to see this metric getting larger, rather than narrowing. But, since spreads can widen or narrow for a number of reasons, it's most important to look for why the spread changed.
3. Are they prepared for rising interest rates?
In short, the closer this number is to zero, the less rising or falling interest rates will impact the value of the company's assets. The chart below shows CYS' interest rate sensitivity in the first quarter.
If interest rate rise by 75 basis points (100 basis points equals one percentage point) CYS predict