Redwood Trust Inc's Dividend Analysis
Assessing the Sustainability of Redwood Trust Inc's Dividend
Redwood Trust Inc (NYSE:RWT) recently announced a dividend of $0.16 per share, payable on 2023-12-28, with the ex-dividend date set for 2023-12-19. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Redwood Trust Inc's dividend performance and assess its sustainability.
What Does Redwood Trust Inc Do?
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Redwood Trust Inc is a real estate investment trust focused on different areas of housing credit. The company operates in three segments: the Residential Mortgage Banking segment consists of a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale to whole loan buyers, securitization through SEMT (Sequoia) private-label securitization program, or transfer into its investment portfolio, Business Purpose Mortgage Banking segment consists of a platform that originates and acquires business purpose lending (BPL) loans for subsequent securitization, sale, or transfers into its investment portfolio, and Investment Portfolio segment consists of organic investments sourced through residential and business-purpose mortgage banking operations.
A Glimpse at Redwood Trust Inc's Dividend History
Redwood Trust Inc has maintained a consistent dividend payment record since 1995. Dividends are currently distributed on a quarterly basis.
Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Redwood Trust Inc's Dividend Yield and Growth
As of today, Redwood Trust Inc currently has a 12-month trailing dividend yield of 10.24% and a 12-month forward dividend yield of 8.40%. This suggests an expectation of decreased dividend payments over the next 12 months.
Over the past three years, Redwood Trust Inc's annual dividend growth rate was -8.50%. Extended to a five-year horizon, this rate increased to -7.50% per year. And over the past decade, Redwood Trust Inc's annual dividends per share growth rate stands at -2.70%.
Based on Redwood Trust Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Redwood Trust Inc stock as of today is approximately 6.93%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-09-30, Redwood Trust Inc's dividend payout ratio is 0.00.
Redwood Trust Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Redwood Trust Inc's profitability 3 out of 10 as of 2023-09-30, suggesting the dividend may not be sustainable. The company has reported net profit in 8 years out of past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Redwood Trust Inc's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Next Steps
In conclusion, while Redwood Trust Inc offers a high trailing dividend yield, the negative dividend growth rates and low growth prospects raise questions about the long-term sustainability of its dividend payments. The payout ratio, while currently non-applicable, along with a low profitability rank, further casts doubt on the company's ability to maintain its dividend in the face of potential challenges. Investors should consider these factors when evaluating Redwood Trust Inc as part of their investment portfolio. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
