They did say quite a bit about it. Right front and center was the following statement: "CreXus distributes dividends based on its current estimate of taxable earnings per common share, not GAAP earnings. Taxable and GAAP earnings will typically differ due to items such as differences in premium amortization and discount accretion"
People think that REITs have to distribute 90% of their earnings, but in reality, they have to distribute 90% of their taxable earnings. Taxable earnings can differ from reported (GAAP) earnings.
Fortunately, this is only temporary. As the company explains in its 10K (under Risks):
"Generally, the cumulative net income we report over the life of an asset will be the same for GAAP and tax purposes, although the timing of this income recognition over the life of the asset could be materially different. Differences exist in the accounting for GAAP net income and REIT taxable income which can lead to significant variances in the amount and timing of when income and losses are recognized under these two measures. Due to these differences, our reported GAAP financial results could materially differ from our determination of taxable income results, which impacts our dividend distribution requirements, and, therefore, our GAAP results may not be an accurate indicator of future taxable income and dividend distributions."
So, taxable earnings do not capture accretion of discount, which was the biggest portion of their GAAP earnings in the last quarter. As a matter of fact, they made less (about 17 cents, if I calculate correctly) in interest and other gains; the rest was accretion of discount.
What is going to happen to the rest that is not returned to us? It will accrete, i.e. it will increase the book value. At some point the loans are paid off or somehow cleared or sold off and these gains are realized. Right now, we are getting paid a portion from unrealized gains.
I believe the company is doing an excellent job and they should be able to employ some leverage to juice up future returns. Contrary to what others are thinking, I cannot see them dropping to $10; that would represent a 20% discount from book.