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Enjoy an 11.4% Yield with Shares of Centerline (CHC)
By: Carla Pasternak
Editor
High-Yield Investing, High-Yield International
Published: October 17, 2007

Centerline Holding (NYSE: CHC, $14.70) -- Centerline is a 34-year-old real estate finance company, formerly known as CharterMac. CHC is involved in a multitude of financial businesses. The firm lends, invests, and manages capital, with a focus on the commercial real estate market.

Among its activities, CHC buys tax-exempt first mortgage bonds issued by local governments and agencies, manages a variety of funds that invest in mortgage-backed securities, and underwrites multi-family mortgage loans for building developers.

The company has paid regular dividends at an increasing rate since 1997. Payouts have risen an average +6% a year over the past five years. The current quarterly payout of $0.42 per share equates to $1.68 per share annually. At current levels, CHC yields a hefty 11.4%.

With dividends of $98.6 million and free cash flow of $110 million, the firm has paid out just under 90% of its cash flow, a level sustainable over time.

CHC traded as high as $21.87 per share this past January, but then proceeded to fall to as low as $10.35 when the stock was tainted with the subprime slime. President and CEO Marc Schnitzer finally put the misconception of subprime exposure to rest recently by stating, "Centerline does not have any single family or subprime exposure, whatsoever."

CHC has since rebounded dramatically from its summer lows. It's worth noting that company insiders have been heavy buyers of the stock lately. In roughly the last six months, insiders have scooped up almost 963,000 shares -- more than ten times what they have sold. In August and September -- well after the credit crunch was front-page news -- Director Nathan Gantcher added nearly 200,000 shares to his already substantial holdings to bring his total ownership to 458,000 shares. Many of his purchases were made in the current $15 range. Other directors have shown similar faith.

Centerline is not without risks. While the credit crunch seems to be easing, unexpected skeletons in the financial closet may still emerge from this sector. That could cause numerous difficulties in the firm's businesses. And while it is often a positive signal, insider buying is not bulletproof. Gantcher, for example, also bought stock in June when the shares were trading above $19!

Even so, with Centerline trading at an attractive valuation of just 1.2 times book value and the firm likely to sustain its lofty dividend, downside risk seems limited.

Action To Take --->  Centerline is an attractive stock for more aggressive investors who wish to capture a robust, double-digit yield and are willing to gamble the summer credit crunch does not again rear its ugly head.



Carla Pasternak
Editor
High-Yield Investing

About High-Yield Investing

High-Yield Investing is a monthly investment newsletter that brings you a wealth of information on the market's leading income stocks and funds, as well as a host of relatively unknown investment options that you probably won't find coverage of anywhere else. Many of these securities provide investors with annual dividend yields of 10%, 15%, even 20% or more. The newsletter not only provides subscribers with investing ideas that produce incredibly high dividend yields, but the kicker is that these high-yield investments have also consistently outperformed the major market averages. (Learn More)

About Carla Pasternak

Editor of StreetAuthority.com's High-Yield Investing newsletter since its inception in May 2004, Carla Pasternak draws on a variety of financial backgrounds to make profitable calls on income-generating stocks for her readers.

Carla has been employed in the investment industry for more than two decades. In addition to her work as a writer for several nationally recognized financial publishers, her previous experience includes a position as president of a well-respected investor relations firm. She has also been writing shareholder reports for public companies since 1980.

A highly successful investment analyst, Carla specializes in high-yield, income-paying stocks. In that pursuit, she's always mindful to select companies that not only pay rich dividends, but that also deliver strong long-term capital gains. Furthermore, Carla's experience in writing SEC filings gives her the added insight required for her to truly understand a company's current and future financial health.

On the educational front, Carla holds BA, MA, MBA and Ph.D. degrees. When she's not watching the market, she's teaching business courses at the college level and managing millions of dollars in portfolio assets.

To learn more about Carla Pasternak's premium income investing newsletter -- High-Yield Investing -- please visit this link.


 

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