Hold Newcastle for Yield Only

Shares of Newcastle Investment Corp. (NCT - Snapshot Report) have tumbled over the past year as the mortgage markets are still in disarray. As expected, the company continued to take charges in the 1st quarter due primarily to impairments on subprime loans. NCT continues to sell assets, at losses, to pay down debt and shore up the balance sheet.

The quarterly payout was cut 65% to $0.25 per share, and the yield is now 10%. We feel that the company has enough liquidity to remain solvent, although we are changing our near-term recommendation to Hold. Residential mortgage markets have not yet bottomed out and the liquidity crisis is not over.

In addition, there are signs that commercial delinquencies are increasing and write downs could be coming. Hold the shares for the yield, which is currently being covered by operating earnings and wait for some of the uncertainty to pan out in the mortgage markets.

Read the full analyst report on NCT.

Read the full analyst report on NCT