American Home Mortgage Delays Dividend Payment

On July 20th, Forbes.com presented its readers with this soothing ditty on American Home Mortgage (AHM): American Home Mortgage Back On Track?. The article prominently featured an RBC Capital analyst tried to give AHM a good pump, though he did cut his price target from $25 to a still unbelievable $20. Ah, those funny cigarettes they smoke down on Wall Street.

On Friday night, AHM made a stunning announcement: American Home Mortgage Investment Corp. Delays Payment of Quarterly Common Stock and Series A and Series B Preferred Stock Dividends.

The common dividend was supposed to have been paid on the 27th, and I've heard that some brokers even credited the accounts of shareholders. When was the last time a company of this size withdrew its dividend at the last minute?

AMH says it has has been hit with margin calls on its credit facilities.

The disruption in the credit markets in the past few weeks has been unprecedented in the Company's experience and has caused major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities.

Ah, this is why paying attention to the Markit.com ABX indices is important. As indexes drop, and the cost of insurance goes up to speculate in the mortgage products, it's a sure sign of trouble for companies like AHM, which did much of its business in Alt-A, and non-conforming loans. The ABX BBB- tranches are at $0.40 on the dollar, and below.

What will this mean for the stock today? At least a delayed opening, a good pounding, and maybe, down to the single digits?

AHM 1-yr chart: