Anyone own shares of a MIC?
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Thread: Anyone own shares of a MIC?

  1. #1
    Senior Member pwm's Avatar
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    Anyone own shares of a MIC?

    I'm looking into Mortgage Investment Corporations as an alternative to more REIT exposure. A good article in the Winnipeg Free Press last week got me interested. There are several publicly traded MICS on the TSX, like Atrium, Firm Capital, Timbercreek and TREZ for example. These things have a crazy high yield which seems too good to be sustainable at first glance, but many have a good track record, and are rated well by analysts. I'm looking at Atrium in particular. Their payout is straight interest which would make them good candidates for a registered account. I'm sitting on some cash in my TFSA and looking for something different.

    Any comments would be appreciated. Thanks in advance.


  2. #2
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    I have nothing of any importance to help you with haha, but I was reading up on REITs which I'm sure you're well versed in. Maybe I should take a look at these as well. Shopping Mall REITs are no go anymore so really that leaves Commercial.

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    I've owned MCAN for years. They use to pay some pretty nice special dividends, above and beyond their regular high yield. I also own Firm Capital. At the end of the day, these are banks so keep that in mind, but if I recall their amount of leverage is restricted by the MIC structure so they are probably a little less leveraged then a normal banking operation and consequently a little safer on that metric. They payout all their taxable income so not a lot of money left for growth which allows for dividend growth. That can really only come from issuing more equity when the shares get ahead of themselves. Definitely for registered accounts. Every distribution is fully taxable if it is not sheltered, but as you said their distributions are big and juicy.
    Last edited by OptsyEagle; 2017-03-11 at 09:33 PM.

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    Quote Originally Posted by pwm View Post
    I'm looking into Mortgage Investment Corporations as an alternative to more REIT exposure. A good article in the Winnipeg Free Press last week got me interested. There are several publicly traded MICS on the TSX, like Atrium, Firm Capital, Timbercreek and TREZ for example. These things have a crazy high yield which seems too good to be sustainable at first glance, but many have a good track record, and are rated well by analysts. I'm looking at Atrium in particular. Their payout is straight interest which would make them good candidates for a registered account. I'm sitting on some cash in my TFSA and looking for something different.

    Any comments would be appreciated. Thanks in advance.
    Well, I'm a big MIC'er. I currently own MCAN, Atrium, Timbercreek, Firm, and previously Trez. They all spit out 7-8% in "dividends", actually interest. Some, like MCAN have been around a long time, and I feel are pretty safe. MCAN is rated very good. Like others have said, they pay out 100% of their earnings, so not much growth potential, but they seem to be very stable in their interest payouts. I hold all of them either in my TFSA or RRSP.

  6. #5
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    I own shares of the Ryan MIC in an RRSP....has been good for the last few years, about 8-9%. I feel good about it

  7. #6
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    A quick look at Atrium shows that they are definitely leveraged, source: http://atriummic.com/pdfs/Atrium%20F...0Q4%202016.pdf

    Tangible common equity is 277,478 and balance sheet assets are 531,856, giving leverage of about 2:1. High performance while leveraged into an up-cycle is not a surprise, nor does it indicate talent. They are 2:1 leveraged while mortgages in Canada are performing well and insolvencies are at a very low level.

    Someone correct me if I'm wrong, but this is basically leveraged investment into mortgages. Note 5(a) says

    The mortgage portfolio has maturity dates between 2017 and 2030 with a weighted average remaining term
    of 12.8 months at December 31, 2016 (December 31, 2015 – 11.1 months). The portfolio has a weighted
    average interest rate (which excludes lender fees earned by the company) of 8.50% (8.66% as at December
    31, 2015).
    What kind of mortgages are these, that carry interest rates of well over 8% for such short terms? Something seems wrong with their mortgage portfolio. I don't buy the story that they are conventional and low risk.

    If you have a portfolio of securities that yield 8% and you're 2:1 leveraged, then of course you can demonstrate ultra high performance. Like I said earlier, this is not a surprise, and it does not indicate talent. It's just leverage on an already high yielding instrument.

    Doesn't this sound a lot like the yield-chasing that occurred in the years leading up to the subprime crisis?
    Last edited by james4beach; 2017-03-14 at 03:31 AM.

  8. #7
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    MCAN appears to be leveraged 8:1. Their portfolio has a lower yield, around 5%.

    Yes even MCAN is less leveraged than a conventional bank. However, banks have dramatically better diversification: a range of loan types and other revenue streams. These MICs are heavily concentrated in certain areas, entirely in mortgages and usually one geography, e.g. Ontario.
    Last edited by james4beach; 2017-03-14 at 03:30 AM.

  9. #8
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    MICs are probably safe for the first half of this year as deleveraging should hold off for a while longer.


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