Robinhood restricts Instant Buying of crypto, citing 'extraordinary market conditions'

Robinhood restricts Instant Buying of crypto, citing ‘extraordinary market conditions’

TipRanks

Let’s talk portfolio defense. After last week’s social flash mob market manipulation, that’s a topic that should not be ignored. Now, this is not to say that the markets are collapsing. After 2% losses to close out last week’s Friday session, this week’s trading kicked off with a positive tone, as the S&P 500 rose 1.5% and the Nasdaq climbed 2.5%. The underlying bullish factors – a more stable political scene, steadily progressing COVID vaccination programs – are still in play, even if they are not quite as strong as investors had hoped. While increased volatility could stay with us for a while, it’s time to consider defensive stocks. And that will bring us to dividends. By providing a steady income stream, no matter what the market conditions, a reliable dividend stock provides a pad for your investment portfolio when the share stop appreciating. With this in mind, we’ve used the TipRanks database to pull up three dividend stocks yielding 8%. That’s not all they offer, however. Each of these stocks has scored enough praise from the Street to earn a “Strong Buy” consensus rating. New Residential Investment (NRZ) We’ll start by looking into the REIT sector, real estate investment trusts. These companies have long been known for dividends that are both high-yield and reliable – as a result of company compliance with tax rules, that require REITs to return a certain percentage of profits directly to shareholders. NRZ, a mid-size company with a market cap of $3.9 billion, holds a diverse portfolio of residential mortgages, original loans, and mortgage loan servicing rights. The company is based in New York City. NRZ holds a $20 billion investment portfolio, which has yielded $3.4 billion in dividends since the company’s inception. The portfolio has proven resilient in the face of the corona crisis, and after a difficult first quarter last year, NRZ saw rising gains in Q2 and Q3. The third quarter, the last reported, showed GAAP income of $77 million, or 19 cents per share. While down year-over-year, this EPS was a strong turnaround from the 21-cent loss reported in the prior quarter. The rising income has put NRZ in a position to increase the dividend. The Q3 payment was 15 cents per common share; the Q4 dividend was bumped up to 20 cents per common share. At this rate, the dividend annualizes to 80 cents and yields an impressive 8.5%. In another move to return profits to investors, the company announced in November that it had approved $100 million in stock repurchases. BTIG analyst Eric Hagen is impressed with New Residential – especially by the company’s sound balance sheet and liquidity. “[We] like the opportunity to potentially build some capital through retained earnings while maintaining a competitive payout. We think the dividend increase highlights the strengthening liquidity position the company sees itself having right now… we expect NRZ has been able to release capital as it’s sourced roughly $1 billion of securitized debt for its MSR portfolio through two separate deals since September,” Hagen opined. In line with his comments, Hagen rates NRZ a Buy, and his $11 price target implies an upside of 17% for the year ahead. (To watch Hagen’s track record, click here) It’s not often that the analysts all agree on a stock, so when it does happen, take note. NRZ’s Strong Buy consensus rating is based on a unanimous 7 Buys. The stock’s $11.25 average price target suggests ~20% upside from the current share price of $9.44. (See NRZ stock analysis on TipRanks) Saratoga Investment Corporation (SAR) With the next stock, we move to the investment management sector. Saratoga specializes in mid-market debt, appreciation, and equity investments, and holds over $546 million in assets under management. Saratoga’s portfolio is wide ranging, and includes industrials, software, waste disposal, and home security, among others. Saratoga saw a slow – but steady – rebound from the corona crisis. The company’s revenues fell in 1Q20, and have been slowly increasing since. The fiscal Q3 report, released early in January, showed $14.3 million at the top line. In pre-tax adjusted terms, Saratoga’s net investment income of 50 cents per share beat the 47-cent forecast by 6%. They say that slow and steady wins the race, and Saratoga has shown investors a generally steady hand over the past year. The stock has rebounded 163% from its post-corona crash low last March. And the dividend, which the company cut back in CYQ2, has been raised twice since then. The current dividend, at 42 cents per common share, was declared last month for payment on February 10. The annualized payment of $1.68 gives a yield of 8.1%. Analyst Mickey Schleien, of Ladenburg Thalmann, takes a bullish view of Saratoga, writing, “We believe SAR’s portfolio is relatively defensive with a focus on software, IT services, education services, and the CLO… SAR’s CLO continues to be current and performing, and the company is seeking to refinance/upsize it which we believe could provide upside to our forecast." The analyst continued, “Our model anticipates SAR employing cash and SBA debentures to fund net portfolio growth. We believe the Board will continue to increase the dividend considering the portfolio’s performance, the existence of undistributed taxable income, and the economic benefit of the Covid-19 vaccination program.” To this end, Schleien rates SAR a Buy along with a $25 price target. This figure implies a 20% upside from current levels. (To watch Schleien’s track record, click here) Wall Street’s analysts agree with Schleien on this stock – the 3 other reviews on record are Buys, and the analyst consensus rating is a Strong Buy. Saratoga’s shares are trading for $20.87, and carry an average price target of $25.50, suggesting an upside of 22% for the next 12 months. (See SAR stock analysis on TipRanks) Hercules Capital (HTGC) Last but not least is Hercules Capital, a venture capital company. Hercules offers financing support to small, early-stage client companies with scientific bent; Hercules’ clients are in life sciences, technology, and financial SaaS. Since getting started in 2003, Hercules has invested over $11 billion in more than 500 companies. The quality of Hercules’ portfolio is clear from the company’s recent performance. The stock has bounced back fully from the corona crisis of last winter, rebounding 140% from its low point reached last April. Earnings have also recovered; for the first nine months of 2020, HTGC posted net investment income of $115 million, or 11% higher than the same period of 2019. For dividend investors, the key point here is that the net investment income covered the distribution – in fact, it totaled 106% of the base distribution payout. The company was confident enough to boost the distribution with a 2-cent supplemental payment. The combined payout gives a $1.28 annualized payment per common share, and a yield of 8.7%. In another sign of confidence, Hercules completed a $100 million investment grade bond offering in November, raising capital for debt pay-downs, new investments, and corporate purposes. The bonds were offered in two tranches, each of $50 million, and the notes are due in March of 2026. Covering the stock for Piper Sandler, analyst Crispin Love sees plenty to love in HTGC. “We continue to believe that HTGC’s focus on fast growing technology and life sciences companies sets the company up well in the current environment. In addition, Hercules is not dependent on a COVID recovery as it does not have investments in “at-risk” sectors. Hercules also has a strong liquidity position, which should allow the company to act quickly when it finds attractive investment opportunities,” Love commented. All of the above convinced Love to rate HTGC an Outperform (i.e. Buy). In addition to the call, he set a $16 price target, suggesting 9% upside potential. (To watch Love’s track record, click here) Recent share appreciation has pushed Hercules’ stock right up to the average price target of $15.21, leaving just ~4% upside from the trading price of $14.67. Wall Street doesn’t seem to mind, however, as the analyst consensus rating is a unanimous Strong Buy, based on 6 recent Buy-side reviews. (See HTGC stock analysis on TipRanks) To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

Robinhood reportedly restricts crypto trading temporarily ‘due to extraordinary market conditions’ as Bitcoin and Dogecoin spike sharply

Robinhood limited cryptocurrency trading due to “extraordinary market conditions” on Friday, CNBC said.

A spokesperson told CNBC customers can still use available deposits in their accounts to buy crypto.

The brokerage’s restriction came as the prices of Bitcoin and Dogecoin spiked sharply on Friday.

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Robinhood limited cryptocurrency trading on its platform Friday following the soaring prices of Bitcoin and Dogecoin, CNBC reported.

“Due to extraordinary market conditions, we’ve temporarily turned off instant buying power for crypto,” a Robinhood spokesperson told CNBC. “Customers can still use settled funds to buy crypto. We’ll keep monitoring market conditions and communicating with our customers.”

Earlier in the day, traders on Robinhood were unable to make new deposits for cryptocurrency purchases. They could buy cryptocurrencies only with the existing deposits in their accounts, which can take five business days to clear, CNBC said.

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolios

The price of Bitcoin surged 15% on Friday to $38,089.94, after Elon Musk changed his Twitter bio to “#bitcoin.” Musk’s tweets have prompted recent frenzies into the shares of video-game retailer GameStop and digital token Dogecoin. The meme-based cryptocurrency that started as a joke soared 336%, to $0.054 on Friday, pushing it into the top 10 cryptocurrencies by market cap, according to data from Coin Gecko.

Robinhood did not immediately respond to Insider’s request for comment.

The platform had also restricted trading of highly volatile stocks like GameStop, AMC, BlackBerry, and others on Thursday before the market open, saying it continuously monitors the markets and makes changes where necessary. It later loosened restrictions and reopened limited buying.

But day traders and some lawmakers sharply criticized the brokerage for leaving its users unable to buy some Reddit-touted stocks. On livestream video service Twitch, Rep. Alexandria Ocasio-Cortez called Robinhood’s decision unacceptable and said more information was needed.

Read More: MORGAN STANLEY: Buy these 17 stocks with strong earnings that are expected to outperform into 2022 even if the broader market sinks

Robinhood restricts access to digital currency

Robinhood has restricted user access to the digital currencies on its platform. Now, Robinhood users can only buy digital currency if the funds on their account have settled; what they can not do is use “instant deposit” money to purchase digital currency.

“Due to extraordinary market conditions, we’ve temporarily turned off Instant buying power for crypto,” said a Robinhood spokesperson.

The extraordinary market conditions that they may be referring to might be the influx of individuals who have decided to invest in digital currency. Yesterday, Dogecoin became widely discussed by a large number of internet communities that have conspired to induce short squeezes on stocks and pump up the price of penny stocks, or really any asset with a value below $1.

As a result, Dogecoin pumped by over 800%, and Robinhood’s platform experienced bottleneck issues due to the swath of users looking to trade stocks that fall under their short-squeeze and penny stock thesis. This style of investing has recently been referred to as “investing in meme stocks.”

Robinhood is under fire

Over the past few days, retail investors have been disappointed with Robinhood. When the short-squeeze and penny stock investment theses began circulating, Robinhood halted or terminated trading for the stocks and digital currencies that became popular due to the thesis.

The retail investors were disappointed that industry giants like Robinhood got to pick and choose where the people were allowed to place their money. Which led many blockchain-enthusiasts to believe that the adoption of decentralized financial products would be catalyzed by this event.

On a decentralized exchange, there is no central entity that can step in and decide which assets can and can’t trade. Instead, it is up to the platform users to provide both the shares and liquidity in the market. In a blockchain-based financial market, trades happen directly from peer-to-peer, and there is no intermediary involved. By cutting out the middleman, consumers can remove oppressive parties like Robinhood that have been dictating how they can and can’t trade.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.