Wunderlich Securities Reiterates Buy Rating on Hatteras Financial (HTS)

Wunderlich Securities is out with a research report this morning, where it reiterates its Buy rating on Hatteras Financial Corp. HTS; it has a $31.50 price target on the stock. The WS analysts cited the company's recent announcement that it would be lowering its dividend, citing the increased risk profile of agency RMBS investing. While the analysts agree that the cycle has passed the peak, they expect that dividends will still be relatively attractive. They also noted that the company furthered its portfolio repositioning initiative by offering 7.5 million shares on September 24, and has both purchased securities outright and contracted for forward settling purchases. As for valuation, the analysts remarked, “based on our projections of a 17.6% ROE in 2011 that will support dividends at the indicated level (and maybe higher), we believe HTS could trade at a 20% premium to trailing book value, or $31.50 per share.”