Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend

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From: bob wallace8/11/2012 11:46:40 AM
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Hi - it's been a long time since I posted to this board or to Silicon Investor in general - but I recently decided I needed to join the crowd and get some return on my otherwise idle cash.

I was wondering if anyone was interested in the original intent of this topic, which was to trade mREITS - specifically to buy and sell them in weeks before the the ex-dividend date.

There are a couple of reasons I am interested in doing this:

1) mREIT dividends do not get special tax treatment - they are ordinary income
2) I am drawing SS now, and I find that a few thousand dollars in dividends tend to cause my SS to get taxed, thus increasing my over all tax liability.
3) I have quite a big loss carry forward from 2001, which I would like to draw down before I die!
4) possibility that dividends will be cut as time goes on, which in turn will cause declines in share price

Bernanke has clearly said that rates will stay at zero until late 2014 - so that should give mREIT investors at least another 18 months. However, right at the moment, mortgage rates are decreasing, compressing the REIT margins causing NLY and others to cut dividends. When mortgage rates start going up, it will be more interesting: the margins should increase [through 2014], but prepayment may also increase as people say "whoa! I'd better refinance now!" . NLY management has been saying that prepayments are low relative to rates [ not sure exactly understand that, but I get the gist], implying that as the housing market recovers, and banks get a bit more lenient, prepayments may rise as owners refinance.

5) Secondaries. I never paid much attention to secondaries until I recently got creamed by two large non-REIT positions which each offered a secondary immediately after my purchase - recovery is going to take awhile. One way to make up for compressed margins is to sell more stock....

So all in all, I am becoming somewhat adverse to holding REITs - however, they do make a nice return.

So, why not trade the mREITS in such a way to make the dividend, but avoid the exposure to big drops in share price. As the originator of this thread said - most people do not like trading for small gains - but small gains over time are just as profitable as holding for the dividend

many of the REITS have had predictable price moves and trend lines since last October -- I am going to try and identify some of those and start trading for the dividend rather than collecting it.

Bob Wallace
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