Stocks on the Road to Greatnesshttp://www.fool.com/investing/general/2012/03/09/stocks-on-the-road-to-greatness-.aspx Rich Duprey
March 9, 2012
For every stock out there screaming, "buy me," others simply give us a nudge and a nod. While all the attention might be focused on their five-star peers, we can sift through Motley Fool CAPS to find four-star stocks giving us the "high sign" that they're approaching greatness.
These opportunities -- including familiar names and beaten-down companies -- rank higher than most of the other 5,400 starred companies, and it pays to investigate their potential. For consideration today I've got a pair of stocks on their way to fame and glory.
Source: Motley Fool CAPS.
As the 180,000-member CAPS community has chosen these two companies as less obvious sources for tomorrow's great buys, let's see why they might merit your attention.
In the sight of greatness
The problem for REITs like Chimera and American Capital Agency (Nasdaq: AGNC ) is the low-rate environment also encourages homeowners to refinance their mortgages, which replaces better-yielding investments with lower-yielding ones. Of course, the flip side is that falling interest rates decrease its financing costs, possibly resulting in a boost to net interest income.
Having steadily cut its dividend over the course of the year, Chimera joins other mREITs, such as American Capital Agency, Annaly Capital Management (NYSE: NLY ) , and Capstead Mortgage, in reducing its payout. Although it started off March by announcing it was preserving its $0.11 dividend -- which currently produces a yield of 14.6% -- it continues to pay out more than what its earnings are, so we have to wonder whether it will be sustainable. The company also announced it was delaying the filing its annual report.
With employment numbers out today running ahead of expectations, it's likely to provide a psychological boost to the market as it will forestall a new round of easing. Highly rated CAPS All-Star jwray01 notes an anomaly with Chimera's prepayments that ought to work out for it: