Chimera Investment Corp.: Time To Buy The Drop?

Chimera Investment Corp.'s (CIM) shares have dropped towards $18 again lately, making a potential long position more appealing. I think today's reward-to-risk ratio and valuation level are way more attractive than the ones we have seen in April 2017 when shares hit their last 52-week high. Today, income investors seeking a high-yield income vehicle with robust dividend coverage and a more reasonable valuation may want to place Chimera Investment Corp.'s shares on the watchlist, or even pull the "buy trigger". An investment in the mortgage REIT comes with an entry yield of 11.1 percent.

I closed my long-position in Chimera Investment Corp. about a year ago as I was increasingly concerned about the mortgage REIT's valuation, and about what seemed to be overly optimistic investor sentiment in the high-yield sector. As a matter of fact, I warned of the fast rate of price appreciation in the mortgage REIT sector in a piece published in April last year, titled "Chimera Investment Corp.: Be Fearful When Others Are Greedy," just before Chimera Investment Corp.'s shares hit a new 52-week high.

That said, though, I think the recent dip is a good opportunity to reevaluate Chimera Investment Corp., and decide whether a long position makes sense again at today's price point.

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