Why Redwood Trust Stock Rose 17% on Friday
Shares of mortgage real estate investment trust (mREIT) Redwood Trust (NYSE: RWT) rose 17% on Friday, as the broader market rallied strongly in early trading. The upturn in the market was largely a bounce back from a huge daily loss the day before, with many stocks that joined in the rally giving up a material portion of their gains before the day was over.
Although there was a last-hour bounce, the S&P 500 Index also lost momentum as the day wore on and wound up giving back a portion of its early advance. Redwood Trust, on the other hand, ended the trading day near its highs. There was clearly more going on here...
The good news that buoyed Redwood Trust's shares was a dividend cut: a pretty material one at that, with the quarterly payment dropping 60%. The REIT's yield before the cut was nearly 18%, so investors had pretty much been expecting the news. That large a cut, however, would usually be associated with a stock decline, not a strong advance.
Source Fool.com
