A Look At Chimera Investment (CIM) Valuation As Dividend Sustainability Concerns Resurface

Fresh attention on Chimera Investment (CIM) is being driven by renewed concern that its elevated dividend yield may be hard to sustain as interest rate swings and housing market stress weigh on its leveraged mortgage portfolio.

See our latest analysis for Chimera Investment.

That tension is showing up in the numbers, with a 2.49% 1 day share price return at the latest close of US$12.74 sitting against a 0.75% 1 year total shareholder return and a weaker 5 year record. This suggests momentum has been fading even as dividend questions move back into focus.

If Chimera’s income focused profile has you reassessing risk and reward, it could be a good moment to broaden your watchlist with fast growing stocks with high insider ownership as potential alternatives.

With a 3.16% intrinsic premium, a 13.81% gap to analyst price targets, mixed total returns, and recent revenue and net income growth, is Chimera trading below its true worth or already reflecting any future recovery in its story?

Most Popular Narrative: 12.1% Undervalued

With Chimera Investment last closing at US$12.74 against a narrative fair value of US$14.50, the implied upside rests on a very specific profit and growth story.

The analysts have a consensus price target of $15.5 for Chimera Investment based on their expectations of its future earnings growth, profit margins and other risk factors.

In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $382.2 million, earnings will come to $168.2 million, and it would be trading on a PE ratio of 10.5x, assuming you use a discount rate of 12.1%.

Read the complete narrative.

Curious what justifies a higher fair value despite current losses and dividend strain? Revenue expansion, margin rebuild, and a reset earnings multiple sit at the heart of this narrative. The tension between upgraded growth forecasts and a lower future P/E is where the full story becomes more detailed.

Result: Fair Value of $14.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, the bigger swing toward non agency and non QM credit, along with heavier short term repo funding, could quickly pressure book value and squeeze earnings if conditions turn.

Find out about the key risks to this Chimera Investment narrative.

Another View: Pricing Looks Full On Sales

That 12.1% upside story sits awkwardly beside how the market is already pricing Chimera on its revenue. The shares trade on a P/S ratio of 5.5x, compared with 4.7x for the US Mortgage REITs industry and a fair ratio of 2.8x that our model suggests the market could move toward.

If sentiment shifts back toward that lower fair ratio, the gap between price and fundamentals may matter more than any narrative about recovery. Are you comfortable with paying a richer revenue multiple while the company is still working through losses and funding risks?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Chimera Investment Narrative

If you are not convinced by this story or prefer to weigh the numbers yourself, you can build a custom view in minutes, starting with Do it your way.

A great starting point for your Chimera Investment research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Chimera is only one part of the puzzle for you, this is the moment to line up a few more ideas before the next move catches you off guard.

• Spot value-focused opportunities by scanning these 876 undervalued stocks based on cash flows that currently trade at a discount to what their cash flows suggest.
• Tap into growth themes by reviewing these 25 AI penny stocks that are tied to artificial intelligence trends across different industries.
• Strengthen your income watchlist by checking out these 14 dividend stocks with yields > 3% that offer yields above 3% backed by underlying businesses.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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