(By Balachander) RBC Capital Markets downgraded its rating on shares of Capstead Mortgage Corp. (NYSE:CMO) to "Sector Perform" from "Outperform", saying the company's returns continue to be attractive but less appealing compared to peers.
Analysts at RBC, which has a price target of $14.00 on the stock, are of the view that rate risk remains more benign for the time being.
CMO cut its quarterly dividend 7% qtr/qtr to $0.40 a share for 2Q12 relative to $0.43 a share in the prior quarter.
"While we expect dividends to remain relatively healthy in the low $0.40 p/s range for now, the cut may also take some steam out of investor sentiment toward the story as well," RBC analyst Jason Arnold wrote in a note.
The brokerage also lowered its 2012 EPS estimate modestly to $1.67 from $1.77 and 2013 estimate to $1.68 from $1.76, due mainly to minor adjustments to spread expectations.
"While Capstead continues to earn an attractive low double-digit percent ROE, valuation now appears fair to us at present," Arnold said.
"CMO offers investors an attractive current income stream, though at levels below the peer group while valuation is above the peer group average, with the result that we prefer other names in the sector," the analyst added.
Dallas, Texas-based Capstead Mortgage is an internally managed mortgage real estate investment trust (REIT).
The stock fell 0.58 percent to trade at $13.82 on Wednesday. Over the past year, shares have been trading between $10.00 and $14.29.