Seeking Alpha

Western Asset adds special payout to Q4 dividend; +4.8% AH

  • Western Asset Mortgage (WMC) declares a combined Q4 and year-end dividend of $2.35 per share, payable in a combination of cash and stock. Shareholders can elect which  to choose - should the cash portion be oversubscribed, each shareholder will get a pro-rata combination, with the cash component no less than $0.80 per share. Last quarter's dividend was $0.90.
  • The dividend is payable on January 28 to holders of record on December 30.
  • November 30 book value is estimated at $16.76 per share - today's close of $15.92 puts the stock at a relatively slim (for the beaten-up mREIT sector) 5% discount to book.
  • Shares +4.8% AH to $16.69
  • Press release
Comments (31)
  • Aikman
    , contributor
    Comments (124) | Send Message
     
    wow... too bad I sold.
    19 Dec 2013, 04:59 PM Reply Like
  • Dividend Living
    , contributor
    Comments (266) | Send Message
     
    Quite the christmas bonus!
    19 Dec 2013, 04:59 PM Reply Like
  • taxman100
    , contributor
    Comments (284) | Send Message
     
    I might take the stock, but have to see if they offer a discount on the reinvestment.

     

    I also have to consider it's impact on my basis. I'd like to keep my basis as high as possible to conserve my unrealized taxable loss.
    19 Dec 2013, 05:01 PM Reply Like
  • William Packer
    , contributor
    Comments (359) | Send Message
     
    Taxman taking the stock? you know u have to pay taxes on that stock dividend as if it was cash. Unless you are in an IRA or tax sheltered account.
    19 Dec 2013, 05:15 PM Reply Like
  • William Packer
    , contributor
    Comments (359) | Send Message
     
    i recommend you sell your shares of WMC, buy back cheaper to avoid the tax and keep the same level of shares as if you selected stock anyways.
    19 Dec 2013, 05:16 PM Reply Like
  • taxman100
    , contributor
    Comments (284) | Send Message
     
    I was trying to think of a compelling reason to take the stock over cash. However, the idea of selling the stock this year to lock in my capital loss, and buying back ex-dividend may be a better plan.

     

    I was also trying to come up with a reason why they are paying out in stock, and not just cash. Their statement suggests they have certain tax attributes they cannot use unless they sell certain assets they would rather keep.
    20 Dec 2013, 09:22 AM Reply Like
  • William Packer
    , contributor
    Comments (359) | Send Message
     
    Btw, last dividend was 0.80 not 0.90 as the article (news post on SA) says.
    19 Dec 2013, 05:15 PM Reply Like
  • lonestarlizard
    , contributor
    Comments (3) | Send Message
     
    No, the last dividend was $0.90. I know because I received it.
    19 Dec 2013, 08:25 PM Reply Like
  • Tucker Leppa
    , contributor
    Comments (343) | Send Message
     
    I see June 27 and September 26 dividend both at $.90. Didn't $WMC report a BV of like $11.36 back in September? Looks like they have been doing extremely well so far this quarter!
    19 Dec 2013, 05:20 PM Reply Like
  • William Packer
    , contributor
    Comments (359) | Send Message
     
    oh yeah.. 0.90 but the core was like 0.80.
    19 Dec 2013, 05:58 PM Reply Like
  • William Packer
    , contributor
    Comments (359) | Send Message
     
    WMC book used to be around $21 a few quarters back
    19 Dec 2013, 06:16 PM Reply Like
  • 67g8i32
    , contributor
    Comments (216) | Send Message
     
    So what? The div is good but the bv slides from 21 to 16
    19 Dec 2013, 07:30 PM Reply Like
  • tomschukar
    , contributor
    Comments (3) | Send Message
     
    What will be the reduction in price on the x-date? $2.35, $.80, $.90, or something in between?
    19 Dec 2013, 07:59 PM Reply Like
  • Tucker Leppa
    , contributor
    Comments (343) | Send Message
     
    It will be the full $2.35.
    19 Dec 2013, 11:26 PM Reply Like
  • jeffc42
    , contributor
    Comments (9) | Send Message
     
    I also recommend selling the stack before it goes ex then buying it back afterwards. This huge dividend is not doing us shareholders any favors. Don't forget that the stock will drop $2.35 when it goes ex, and the whole amount will be taxable as dividend income, regardless of how much you take in stock or cash.

     

    When there is a choice of taking the dividend as stock or cash, the IRS treats the entire amount as immediately taxable. If there was no choice, the stock dividend would typically reduce your per-share cost basis and have no tax consequences until you sold the shares. If you hold the shares in an IRA, that obviously changes things. But you're still not really benefiting from this.

     

    They are doing this to maintain their REIT status, as they explicitly state, not to reward us. Nothing wrong with that; just understand it for what it is.
    19 Dec 2013, 08:15 PM Reply Like
  • gglenn
    , contributor
    Comments (3) | Send Message
     
    My question is di we get a combination of stock and cash worth $2.35 per share???
    19 Dec 2013, 08:22 PM Reply Like
  • gglenn
    , contributor
    Comments (3) | Send Message
     
    No last quart. the dividend was .90
    19 Dec 2013, 08:27 PM Reply Like
  • gglenn
    , contributor
    Comments (3) | Send Message
     
    Question, do we really get $2.35 per share?
    19 Dec 2013, 08:28 PM Reply Like
  • wuly09
    , contributor
    Comment (1) | Send Message
     
    I'd like to take the stock too, but need to know on the stock price.
    19 Dec 2013, 08:28 PM Reply Like
  • jeffc42
    , contributor
    Comments (9) | Send Message
     
    The stock price will be whatever the current market price is at the time of the distribution. Obviously, you cannot know what that will be when you have to make your decision.
    22 Dec 2013, 11:43 AM Reply Like
  • RCook_
    , contributor
    Comments (13) | Send Message
     
    How is this going to affect those who have sold WMC short? There are a lot of shorts on this stock.
    19 Dec 2013, 10:41 PM Reply Like
  • Dividend Living
    , contributor
    Comments (266) | Send Message
     
    Sounded like you choose all cash or all stock, and if too many choose cash they will give .80 in cash and the rest in stock. I think ill choose cash.
    20 Dec 2013, 12:57 AM Reply Like
  • Javimanic
    , contributor
    Comments (237) | Send Message
     
    ATTN-woe be any shorter who tries to stay on through the ex div day and beyond. The buy vultures like me will be using cash I've had waiting for this moment to nab shares at a huge $2.35 discount...so the shorts will have to pay the div AND watch it rise back up as well.
    20 Dec 2013, 10:54 AM Reply Like
  • Tucker Leppa
    , contributor
    Comments (343) | Send Message
     
    How is a dividend any sort of a discount?
    20 Dec 2013, 07:53 PM Reply Like
  • rgaryk
    , contributor
    Comments (3) | Send Message
     
    How will the share price be determined for distribution? Current price of $17 per share, the distribution would be .138 per share.
    22 Dec 2013, 10:59 AM Reply Like
  • jeffc42
    , contributor
    Comments (9) | Send Message
     
    The current market price at the time of distribution. That's how the IRS will determine the cost basis of those shares.
    22 Dec 2013, 12:51 PM Reply Like
  • Javimanic
    , contributor
    Comments (237) | Send Message
     
    invariably when one of these stocks goes ex div...they either quickly rise back to normal prices or slowly come back. So, grabbing shares on ex div is really like buying for the dividend without having to get taxed. It comes down to faith it will rise again. I would probably buy pre ex div but I use reinvested div payments from all my mreits -not just WMC-as my source of money to purchase.
    22 Dec 2013, 11:51 AM Reply Like
  • stryke20
    , contributor
    Comments (3) | Send Message
     
    not now
    9 Jan, 03:10 PM Reply Like
  • A-nonamous
    , contributor
    Comment (1) | Send Message
     
    How to we make the choice?, i.e, only two weeks to payout and I have not been contacted to tell anyone I WANT CASH OR SHARES...
    14 Jan, 06:25 AM Reply Like
  • Dividend Living
    , contributor
    Comments (266) | Send Message
     
    I haven't been contacted either, not even a message from the broker. maybe they are basing the decision on what executives that hold a lot of shares pick. Im assuming im getting .80 and then the rest in stock unless I hear otherwise.
    15 Jan, 10:45 AM Reply Like
  • Tucker Leppa
    , contributor
    Comments (343) | Send Message
     
    Well, I'm guessing they will go by your normal preferences. For me with Fidelity, I have the option to reinvest my dividends into stock or get cash. Then they automatically do whatever I have opted in for. So if you haven't heard anything, you'll probably get what you normally do. Of course if too many people opt for money, you'll only get $.80 then rest in stock.
    15 Jan, 03:48 PM Reply Like
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