UPDATE: Stifel Nicolaus Raises PT to $23 on Apollo Residential Mortgage on Book Value Gains

Stifel Nicolaus reiterated its Buy rating on Apollo Residential Mortgage

and raised its price target from $21,50 to $23. Stifel Nicolaus said, “Apollo raised the dividend to 85c in 3Q12 (from 75c) while core EPS moved more or less sideways at 67c. The excess (plus a lot more) was supported by realized gains on MBS sales. In our view there's a fine line between harvesting gains for the sake of supporting an artificially high yield and paying out gains that occur in the normal course of business in portfolio rebalancing. In our view Apollo is operating in the latter category, it makes sense to sell assets that the company believes the market has come to overvalue, and it makes sense to pay that out (since it represents taxable income). Based purely on realized gains to date we see the dividend as sustainable for another quarter or two, and Apollo has over $5 per share of unrealized gains in the portfolio." Apollo Residential Mortgage closed at $21.34 on Thursday.