Buy Recommendations for New Residential Investments
Today I recommend a short term trade entry with a Buy recommendation for New Residential Investments (NYSE:NRZ).
New Residential is a finance REIT that invests in the arcane financing of the mortgage market such as mortgage servicing rights and servicer advances. The company has been very successful in its short history, increasing the dividend several times, include two in the last three quarters for a 50% increase in the payout.
However, the market continues to price NRZ to yield around 10%. Yesterday, June 10th, the company made an secondary equity offering which pushed the share price below $16, almost $2.00 the high set before the last ex-dividend date. The company is currently paying a $0.45 quarterly dividend for an 11.2% yield. New Residential will announce earnings in early August and declare its next dividend payment in mid-September. The stock just went ex-dividend on June 8th and the share price is 7% below the ex-dividend date closing price.
I expect NRZ to hit $17.50 before the next ex-dividend date. That is about 9% higher than the current trading range. If NRZ increases the dividend again, we may do better.
Recommendation: Buy NRZ up to $16, or maybe a few cents over and with a target price of $17.50 before mid-September for a 9% gain.