Dennis Mitchell, CFA Firm Capital Mortgage Investment FC-T HOLD Jul 20, 2009

This company doesn’t retain any of its profits. Pays out 100% of its profits in the form of dividends so the BV per share never grows. This is like a high-yield bond.

This would be among the best.Concientious management. Has had a little bit of a correction but feels that correction is based on interest rates, not anything that has gone on with the company.

High payout ratio, but more like a high yield bond. They pay out most of their profits. There is no capital appreciation but you get 9 or 10% payout during the year. The stock is not designed to go up. It goes up and down with the appetite for yield.

Lending for real estate projects. As interest rates rise, there might be a slowdown in projects so could slow down business for this one. Maybe this real estate cycle is long in the tooth on the building side. He owns more REITs instead of the financing side.

A mortgage corp. They invest in mortgages, both commercial and residential. It is a very well run company that has a nice dividend. There is a potential for them to be impacted by the new mortgage rules if the housing market slows down.

He prefers the private space, because they are just getting the trend on how much you are receiving from the mortgages. You are getting a lot more ability, and pricewise it is about the same. Firm Capital is a well-run company.

FC is a relatively small mortgage lender. The stock is cheap at 10X earnings, and it mostly trades for its 9.4% yield. The dividend has not been raised for at least 10 years, but it does pay fairly regular small special dividends annually. There has been esssentially no growth in per share earnings in 15 years, and its business is very closely tied to housing, rates, and the economy. With this, and with its small size, it should be consider higher-risk income, certainly. We do not really see any red flags other than these risks, but we would prefer to see growth. Competitive pressures have increased, and a recession or 'higher for longer' rates would not help the stock much. The stock has declined about 30% over the past decade. This has been offset by the dividend, but the stock could still drift lower, lowering net gains on the dividend. 
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