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Anworth Mortgage Asset Corporation Message Board

  • bobbobwhite bobbobwhite Apr 5, 2002 7:46 PM Flag

    Perhaps someone

    more familiar with the inner workings of REITs can explain the doing DD on ANH I saw on that some REITs' payout ratio is more than 100%. How is this possible, or is it an error? Thanks in advance for a mature and knowledgable answer.

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    • The reference is to earnings. REITs pay out 90% of all net gains, especially FFO (Funds From Operations) that is a good indicator of cash flow, and a good thumbnail on health/profitability. Reading the Quarterly statements and the associated Co. press release a must. Since this varies by co., this is the best general answer I can give.

      MBS and CMBS types are different, and more dificult to guesstimate, as the value of mortgages, held, pre-paid, paid, and defaulted comes into play- a tough number for the typical investor to figure. Some here with experience in the industry, and investing in the MBS/CMBS arena should be asked for further explanations. Hope this points you in the right direction.

    • Sometime a portion of dividend can be return of capital, reducing your cost basis on the stock.

    • bobbobwhite,

      I think you will find that ANH dividends have tracked earnings fairly closely over longer periods of time.

      I think what you are seeing is timing differences. ANH paid less than earnings in the first part of 2001, then paid more than earnings in the second half to catch up.

      Try comparing earnings for a given year versus dividends for that year.

      Variations can also occur because the REIT dividend statutes are based on taxable earnings, not the GAAP (Generally Accepted Accounting Principles) earnings that ANH reports in its financial statements.

      Hope this helps.


    • The payout can be over 100% depending on WHAT that 100% is "of."

      It can be OK if it's due to the fact that depreciation counts against earnings but isn't cash. Therefore they can pay more than 100% of "earnings" and no sweat.

      It can be bad if, in effect, they're borrowing money to pay div's with. REITS can get away with that ... for a while ... because they're replacing, over time, equity with debt.

      Complications apply. MANY complications. Welcome to the somewhat weird world of REITS.

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