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Crexus Investment Corp. Message Board

  • mreitcmbs mreitcmbs Jan 11, 2012 9:15 PM Flag

    Question/statement regarding dividend...

    I've been watching this company since they went IPO back in 2009 and decided to take another look at it with the increasing dividend over the last few quarters. So I decided to sit down and look over the 10Q tonight and discovered what I suspected is the case for the unusually high increasing dividend. In an improving CMBS market I can see a 35 cent dividend (maybe even higher?) but question the long term sustainability of it and here's my reasoning:

    In the 10Q:
    "We had average earning assets of $1.1 billion and $318.2 million for the quarters ended September 30, 2011 and 2010, respectively. Our interest income was $44.0 million and $5.7 million for the quarters ended September 30, 2011 and 2010, respectively. The annualized yield on our portfolio was 16.42% and 7.15% for the quarters ended September 30, 2011 and 2010, respectively. We attribute the increase in interest income to the purchase of additional assets. We attribute the increase in yield to recognizing the accretable yield over the life of loans purchased at a discount to their estimated terminal value."

    So essentially embedded in the yield is a signficant amount of accretion of their investments to par. While I don't see anything wrong with this on the surface it begs the question as to where the cash is going to come from to pay for the dividend as they will either a) use cash on hand or b) sell the asset that has "accreted" in value to obtain the income that is generated from the accretion, or perhaps c) when assets pay off from time to time, use that principal/interest to pay the dividend. I understand they have to recognize the income from this and its considered taxable, but you can only play the buy low / sell high game for so long until the financial results get somewhat "lumpy". I can see about a dollar dividend as sustainable long term given 1 billion in assets and no debt, but I'm not see the current 1.40 and higher people are talking about. Perhaps at that point in time in the future, they can apply some leverage to juice the returns.

    Thoughts?

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    • It's a black eye on FIDAC if you ask me. But as I said, since they really haven't done anything with cash on hand other than buying the Barclay's portfolio early last year, that high dividend over 30 cents was unsustainable.

      • 1 Reply to mreitcmbs
      • thanks - i appreciate your due diligence...bot some yesterday act 10.25...wondering if you have any "new" thoughts about their dividend, balance sheet (lots of cash?), and likely real yield going forward...i m just starting to dig into 10k but they seem very clean to me with risk of maybe a 20c low end of div ~7.8% which is fine by me.......

 

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