Updated July 14, 2021 by Bob Ciura
Investors are often drawn to dividend stocks because they generate income. Stocks that pay dividends provide income even when the price of the stock may fluctuate.
There are some companies that even pay monthly dividends, which allows for constant cash flows for investors. But there are fewer than 60 stocks that pay a monthly dividend.
You can download our full list of stocks with monthly dividend payments (along with price / earnings ratio, dividend yields, and payout ratios) by clicking the link below:
Ellington Financial Inc (EFC) is a real estate investment trust or REIT that pays a monthly dividend. Even better, the stock has a very high dividend yield of over 10%.
Of course, high yield stocks can often be a red flag that the underlying business is facing major challenges. Stocks with extremely high yields of over 10% can later lure investors into the trap with dividend cuts. These “yield trap” stocks should be avoided.
This article examines Ellington Financial’s business model, growth outlook, and dividend security to determine whether investors should consider buying the stock.
Ellington Financial was only converted into a REIT in early 2019. Previously, the trust was taxed as a partnership. It is now classified as a mortgage REIT.
Ellington Financial is a hybrid REIT, meaning the trust is a combination of a stock REIT that owns real estate and mortgage REITs that invest in mortgage loans and mortgage-backed securities.
Ellington Financial has a market capitalization of over $ 900 million. In the picture below you can see a snapshot of Ellington’s investment portfolio:
Source: Investor Presentation
Credit stocks make up 47% of assets, with agency stocks making up the majority at 53%.
May 5ththe, 2021, Ellington Financial released its Q1 results for the quarter ended March 31stst, 2021. Due to the Ellington’s business model has no sales. Instead, only the income is recorded. Interest income came at $ 34.2 million, a slight increase of 0.5% for the quarter–over–Quarter, while core earnings per share were $ 0.43, Jan.0.2% higher than Q4 2020 due to increased portfolio yield spreads.
The company used its strong track record to Growth in its height–profitable loan portfolios and opportunistically rotate their capital allocation towards more promising ones Securities.
W.While the entire long loan portfolio even fell by 9% Quarter over previous quarter because of purchase small commercial mortgages and consumer credit, Ellington’s book value per share rose from $ 17.59 to $ 18.16 during the year the quarter.
Ellington’s EPS generation has been quite inconsistent over the past decade as rates have largely declined. As a As a result, the dividend per share has also largely declined since 2015.
However, the company has done its best to diversify and diversify its portfolio reduce its pe itsPerformance variance. For example, 74% of RMBS exposure is accounted for by 30–Year fixed mortgages.
While around 51% of the loan portfolio is invested in residential mortgages, this 50% is spread across many different types of securities (not–QM,Reverse mortgages, REOs, etc.). Ellington took great care of it too late not to focus risk in too few areas, which improves the volatility of economic returns.
Ellington designed his portfolio in a way that price movements over time have no effect a big impact on the overall portfolio.
However, since the interest spreads are continuously falling and the expensive financing of the stock due to its high dividend continue to put pressure on the EPS generation. Caution and price in the output we forecast EPS GRowth from 1% per year until 2026.
Ellington Financial has a volatile dividend history with several cuts followed by increases. The Company cut its monthly dDividend from $ 0.15 to $ 0.08 in the first quarter 2020 because of the pandemic, but Management has since then increased several times.
In the first quarter of 2021, the company announced another hike to $ 0.15 per month, which is now pre-pandemic dividend levels. At a level of $ 0.15 per share per month, Ellington Financial’s annualized dividend payout is $ 1.80 per share. We forecast earnings per share of $ 1.76 for fiscal 2021, reflecting the company’s asset rotation to get better–executing assets.
This means that the annualized dividend payout is not entirely covered by the underlying EPS, a problematic sign. The company’s DPS should be considered secure for now. HHowever, based on DPS’s historical downward trend, slight declines are in the future possible by the risks of the mortgageit is delinquent amid the ongoing pandemic and over theall falling interest rates.
It is positive that the balance sheet High quality sheet metal scraps, even although Ellington’s debt–to–Equity ratio increased from 2.6 to 3.2 in the first quarter. The days of mortgage REITs with 8x or 9x leverage has come and gone, but Ellington is still embodying low leverage for a Mortgage REIT that is intended to improve and reduce security Volatility during both good and bad times.
With a return of over 10%, the stock is definitely attractive to income investors, although high volatility is to be expected. Since going public, the company has paid cumulative dividends of over $ 27 / share, which is more than 1.5x its current share price. Hence it delivered a solid one Income accrues to shareholders over the years.
High-yielding dividend stocks must always be carefully examined, as the increased yield is often a warning sign of fundamental deterioration. In the case of Ellington Financial, this appears to be the case, as the company is highly volatile in its dividend payments.
The trust has a diversified loan portfolio and has proven itself over time in increasing its profitability. Ellington Financial’s dividend yield also looks safe for now, although a further cut in the offering could come if the trust were to see a slowdown in its business.
Investors who are unwilling to take on heightened risk should probably avoid Ellington Financial stocks. However, Ellington Financial stock pays monthly dividends and has double-digit returns provided the dividend stays intact. For investors with a higher risk tolerance, Ellington Financial may be an attractive investment option.
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