Two Harbors Investment Corp's Dividend Analysis: A Closer Look at Sustainability and Growth
Breaking down the dividend performance, payout ratio, and growth prospects of Two Harbors Investment Corp
Two Harbors Investment Corp (NYSE:TWO) recently announced a dividend of $0.45 per share, payable on 2023-10-27, with the ex-dividend date set for 2023-10-02. 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 deep dive into Two Harbors Investment Corp's dividend performance and assess its sustainability.
Overview of Two Harbors Investment Corp
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Two Harbors Investment Corp is a real estate investment trust primarily focused on investing in, financing, and managing residential mortgage-backed securities, or RMBS; residential mortgage loans; mortgage servicing rights; and commercial real estate. The majority of the company's investment portfolio is split between agency RMBS purchased from government-sponsored enterprises and nonagency RMBS. Two Harbors derives nearly all of its revenue in the form of interest income collected from its investments. Most of this income is generated by available-for-sale securities, while residential mortgage loans held for investment in securitization trusts also contribute a sizable amount.
Two Harbors Investment Corp's Dividend History
Two Harbors Investment Corp has maintained a consistent dividend payment record since 2009. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Two Harbors Investment Corp's Dividend Yield and Growth
As of today, Two Harbors Investment Corp currently has a 12-month trailing dividend yield of 17.60% and a 12-month forward dividend yield of 13.60%. This suggests an expectation of decrease dividend payments over the next 12 months.
Over the past three years, Two Harbors Investment Corp's annual dividend growth rate was -26.60%. Extended to a five-year horizon, this rate increased to -24.50% per year. And over the past decade, Two Harbors Investment Corp's annual dividends per share growth rate stands at -15.00%.
Based on Two Harbors Investment Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Two Harbors Investment Corp stock as of today is approximately 4.33%.
Can Two Harbors Investment Corp Sustain its Dividend Payments?
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 2023-06-30, Two Harbors Investment Corp's dividend payout ratio is 0.00.
Two Harbors Investment Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Two Harbors Investment Corp's profitability 3 out of 10 as of 2023-06-30, suggesting the dividend may not be sustainable. The company has reported net profit in 8 years out of past 10 years.
Two Harbors Investment Corp's Growth Metrics
To ensure the sustainability of dividends, a company must have robust growth metrics. Two Harbors Investment Corp's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
Revenue is the lifeblood of any company, and Two Harbors Investment Corp's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Two Harbors Investment Corp's revenue has increased by approximately -12.80% per year on average, a rate that underperforms than approximately 89.06% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Two Harbors Investment Corp's earnings increased by approximately -17.00% per year on average, a rate that underperforms than approximately 77.43% of global competitors.
Conclusion
While Two Harbors Investment Corp has a history of consistent dividend payments, the company's negative growth rates, low profitability rank, and high payout ratio raise concerns about the sustainability of its dividends. Investors should closely monitor these factors and consider their investment objectives and risk tolerance before making investment decisions. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article first appeared on GuruFocus.
