Jefferies Comments On Chimera Investment Corp. Following Dividend Reduction

While directionally consistent with our expectations, Chimera Investment's CIM dividend reduction occurred earlier in 2011 than forecasted. Jefferies believes the reduced dividend is a byproduct of both the natural delevering that occurs in re-REMIC subordinate securities, as well as share count drag caused by recent capital raises. Prior to this announcement, Jefferies was forecasting GAAP EPS of $0.14 for 1Q11. From a dividend perspective, it forecasted a decline to occur in 3Q11. Based on this announcement, it is leaving its forward 2011 EPS estimate of $0.60 unchanged, but Jefferies is reducing its forward quarterly dividend estimate to $0.14 per share for 2011, falling to a quarterly rate of $0.12 per share for 2012. Barring further equity raises, Jefferies expects the quarterly dividend to remain in the $0.14 per share range for the majority of 2011, before trending down to the $0.12 range in 2012. Jefferies does not anticipate additional equity raises to occur at CIM unless RMBS prices suffer a meaningful sell-off, or the new issue non-Agency securitization market is revived. Jefferies has a Buy rating and $4.50 PT on CIM CIM closed Monday at $4.28