Capstead Mortgage (NYSE:CMO) Has EPS Upside in 2011

Capstead Mortgage (NYSE:CMO) is expected to have more upside for its EPS in 2011, as further abatements of prepayments continue.

FBR said, "Last week, CMO announced a $0.39/share 4Q10 dividend, representing a 50% increase over the 3Q payout of $0.26. In that the dividend exceeded our 4Q10 EPS estimate of $0.36, we have adjusted our EPS estimates in conjunction. The significant dividend bump is evidence that the company's portfolio, which had been hindered by high prepayments and slower-than-expected capital redeployment, has turned the corner. We expect additional EPS upside in FY11 as prepayments abate further and a material amount of legacy swaps roll off...At current levels, CMO trades at a 6% premium to last reported book value and a 12.5% dividend yield. At our $13.00 price target, shares would trade at a 12% dividend yield and a 10% premium to book value, which are conservative metrics in our opinion."

FBR Capital maintains an "Outperform" on Capstead Mortgage, raising their price target on them from $12.50 to $13.