Why Chimera's Shares Jumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mortgage REIT Chimera Investment (NYS: CIM) were flying high today, gaining as much as 14% in intraday trading after the company announced that it will restate its earnings and lower its dividend.

So what: While neither of the two news releases today may sound particularly encouraging, they are being well received by investors, because they represent a big step towards clearing up significant uncertainty that's been hanging over Chimera. The company hasn't reported results since the third quarter of last year, and the stock has fallen close to 20% over the past year.


Perhaps more significant though, is the company's dividend announcement. As with fellow mortgage REITs -- and, really, REITs in general -- the dividend is a primary attraction for investors and, without reported results, investors may have begun to worry that Chimera wouldn't be able to continue to support its payout. While the $0.09 quarterly dividend does represent a cut of nearly 20%, it still provides investors with a more-than-comfortable 15% yield at today's prices.

Now what: This is legitimate good news for Chimera investors, and it's reasonable for shares to be reacting this way to the news. However, it's notable that while this clears up some significant near-term points of uncertainty for Chimera, like the other mortgage REITs, the company still faces the longer-term uncertainty around interest rates and how long spreads will be kind to this particular business model.

Want to keep up to date on Chimera Investment?Add it to your watchlist.

The article Why Chimera's Shares Jumped originally appeared on Fool.com.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferdoes not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter@KoppTheFoolorFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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