Scott Kennedy’s mREIT Sector Comparison Article: Rithm Capital’s BV, Sector Valuation, And Dividend Versus 19 mREIT Peers – Part 2 (Includes Q1 2024 Dividend Projection For All Peers)
Introduction section by Colorado Wealth Management Fund.
Article section by Scott Kennedy.
Bringing More of Scott’s Work to Our Website
The REIT Forum is a service produced by Michael Vanloon (better known as Colorado Wealth Management Fund) and Scott Kennedy. After intense consideration, I decided to launch our service through Substack. Since then, we’ve seen great success. Substack enables us to give readers real-time alerts with entire articles delivered directly to their inboxes.
You’re probably used to seeing the “from” field saying: “ColoradoWealthManagementFund from The REIT Forum”.
In some of our future e-mails, it may say:
“Scott Kennedy from The REIT Forum”.
That will simply mean we’ve updated the backend of the website for Scott Kennedy to directly post his articles.
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For the moment, I’ll be posting Scott’s work. The following articles are a direct copy and paste from Scott. While we get the back end set up, there is a delay in getting the articles posted. Rest assured that it should be solved soon.
Finding Our Positions
I posted a subscriber-exclusive article with links to our Google Sheets. You can always access our positions there. Scott’s positions are updated each week. CWMF’s positions are usually updated on the same day as the trade.
Disclosures
Related to the stocks in this article:
CWMF is long: RITM-D, GPMT-A, DX-C, EFC-A, RITM-C, EFC-B, PMT-C, PMT-B, AGNCP, CIM-D, RITM-B, RITM, SLRC, GPMT, RC.
Scott Kennedy is long: RITM, RC, SLRC, GPMT, ARCC, GBDC, RITM-D, MITT-B, MITT-C, GAINL, ECCC, ECCW.
The rest of this post is from Scott Kennedy.
Summary
This article compares RITM’s recent dividend per share rates, yield percentages, and several dividend sustainability metrics to 19 mREIT peers.
This includes an analysis of RITM’s quarterly core earnings/earnings available for distribution (“EAD”) which directly impacts the company's dividend sustainability.
This article also projects RITM’s dividend sustainability for Q1 – Q2 2024.
My current RITM buy, sell, or hold recommendation (based on a valuation methodology) and current BV projection are stated in the “Conclusions Drawn” section.
Subscribers receive additional data within 3 added tables which include dividend per share rate ranges (and probabilities) for Q1 2024 regarding all 20 mREIT companies I/we currently cover.
Author’s Note: This is an “early look” for the REIT Forum subscribers regarding PART 2 of my quarterly mortgage real estate investment trust (mREIT) sector comparison article. While I will be providing this article to the public in the near future, this “version” of the article per se provides dividend per share rate ranges and probabilities for the first quarter of 2024 regarding all 20 mREIT companies I currently cover. This specific piece of data is solely for the REIT Forum subscribers. The public version will only provide RITM’s dividend projection and probability. This also includes two separately-ranked tables and one dividend per share range and probability table for more effective sector comparative metrics. In the future, subscribers will get additional early looks regarding mREIT and business development company (“BDC”) articles I provide to the public, along with additional data/metrics and per share price ranges. Furthermore, this includes same day/near future mREIT and BDC earnings articles and weekly recommendation change articles that are only provided to subscribers of the REIT Forum. This also includes “real time” (same day) purchase and sale disclosures regarding my personal holdings/portfolio.
Focus of Article:
The focus of this two-part article is to provide a very detailed analysis comparing Rithm Capital Corp. (RITM) RITM 0.00%↑ to 19 other mREIT peers I currently fully cover. I am writing this two-part article due to the continued requests that such an analysis be specifically performed on RITM and some of the company’s mREIT peers at periodic intervals. For readers who just want the summarized conclusions/results, I would suggest to scroll down to the “Conclusions Drawn” section at the bottom of each part of the article.
PART 1 of this article analyzed RITM’s recent results and compared several of the company’s metrics to 19 mREIT peers. PART 1 also showed how RITM’s book value (“BV”) as of 9/30/2023 compared to the 19 other mREIT peers. PART 1 helps lead to a better understanding of the topics and analysis that will be discussed in PART 2. The link to PART 1’s analysis is provided below:
Investing Group Version (Expanded Analytics):
The focus of PART 2 of this article is to compare RITM’s recent dividend per share rates, yield percentages, and several dividend sustainability metrics to 19 mREIT peers. This analysis will show recent past data with supporting documentation within Table 9 below. This article will also discuss RITM’s dividend sustainability which is partially based on the metrics outlined in Table 9. A more in-depth analysis of RITM’s dividend sustainability will be provided in Table 10 below.
By analyzing these metrics, one will better understand which mREIT generally has a safer dividend rate going forward versus other peers who generally have a higher risk for a dividend decrease or a higher probability of a dividend increase and/or a special periodic dividend being declared. When both back testing and projecting the metrics within this analysis, the results have continued to be proven extremely reliable. This is not the only data that should be examined to initiate a position within a particular stock/sector. However, I believe this analysis would be a good “starting-point” to begin a discussion on the topic. At the end of this article, there will be a conclusion regarding the following comparisons between RITM and the 19 mREIT peers: 1) trailing 12-month (“TTM”) yields based on a stock price as of 12/22/2023 (including 1- and 5-year dividend change); 2) annual forward yield based on a stock price as of 12/22/2023; and 3) annual forward yield based on my estimated CURRENT BV (BV as of 12/22/2023). I will also provide my current RITM BUY, SELL, or HOLD recommendation, price target, and dividend per share rate projection for the first and second quarters of 2024.
Side Note: I believe there are several different classifications when it comes to mREIT companies. For purposes of this article series, I am focusing on 4. For readers who are new to my articles or for existing readers who need a “refresher” on several different mREIT classifications, please see PART 1 of this article (link provided above).
Dividend Per Share Rates and Yield Percentages Analysis - Overview:
Let us start this analysis by getting accustomed to the information provided in Table 9 below. This will be beneficial when comparing RITM to the 19 mREIT peers within this analysis.
Table 9 – Dividend Per Share Rates and Yield Percentages
(Source: Table created by me, obtaining historical stock prices from NASDAQ and each company’s dividend per share rates from the SEC’s EDGAR Database)
Using Table 9 above as a reference, the following information is provided (see each corresponding column): 1) dividend per share rate for the third quarter of 2023 (for monthly dividend payers, the total monthly dividends during the quarter); 2) core earnings (or core earnings equivalent) for the third quarter of 2023; 3) stock price as of 9/22/2023; 4) TTM dividend yield (dividend per share rate from the fourth quarter of 2022 - third quarter of 2023); 5) annual forward dividend yield based on the dividend per share rate for the third quarter of 2023 using the stock price as of 9/22/2023 (for monthly dividend payers, the latest monthly dividend per share rate during the quarter); 6) annual forward dividend yield based on the dividend per share rate for the third quarter of 2023 using a BV as of 9/30/2023 (for monthly dividend payers, the latest monthly dividend per share rate during the quarter); 7) dividend per share rate for the fourth quarter of 2023 (for monthly dividend payers, the total monthly dividends during the quarter); 8) stock price as of 12/22/2023; 9) TTM dividend yield (dividend per share rate from the first quarter of 2023 - fourth quarter of 2023); 10) annual forward dividend yield based on the dividend per share rate for the fourth quarter of 2023 using the stock price as of 12/22/2023 (for monthly dividend payers, the latest monthly dividend per share rate during the quarter); 11) annual forward dividend yield based on the dividend per share rate for the fourth quarter of 2023 using estimated CURRENT BV (BV as of 12/22/2023) (for monthly dividend payers, the latest monthly dividend per share rate during the quarter); 12) dividend per share rate for the fourth quarter of 2023 versus the fourth quarter of 2022 (percentage fluctuation); and 13) dividend per share rate for the fourth quarter of 2023 versus the fourth quarter of 2018 (percentage fluctuation; shows post-COVID-19 impact to each company’s dividend).
As of 12/22/2023, ARMOUR Residential REIT Inc. (ARR), Dynex Capital Inc. (DX), and New York Mortgage Trust, Inc. (NYMT) had a stock price that “reset” lower regarding each company’s monthly/quarterly dividend accrual. In other words, each company’s “ex-dividend date” for December 2023/the fourth quarter of 2023 had already occurred.