Invesco Mortgage (NYSE:IVR) has announced its latest dividend, and to the surprise of some, the company cut the dividend. A cash dividend of $0.45 per share of common stock will be paid on January 27, 2015 to stockholders of record on December 29, 2014, with an ex-dividend date of December 24, 2014. This represents a 10% cut from the prior payout of $0.50. The company also declared a quarterly cash dividend on its 7.75% Series A Preferred Stock of $0.4844 per share. The dividend will be paid on January 26, 2015 to stockholders of record on January 1, 2015. Finally, it declared a quarterly cash dividend on its 7.75% Fixed-to-Floating Series B Preferred Stock of $0.4844 per share. The dividend will be paid on March 27, 2015 to stockholders of record on March 5, 2015.
When I recently opined on IVR, I discussed that the largest issue I had with the company was its narrowing interest rate spread relative to the competition, which would hinder its ability to generate profits going forward. The prediction I had for the company was that it would be unable to cover its dividend and this came to pass. Given this problem, I also felt the dividend was in jeopardy.
This is obviously bearish news for the company. I can't spin a dividend cut as a positive, despite other things helping the company like insider buying. The fact is that the earnings stink and they are too weak for my liking. For the most part, the company followed the general trend of other companies in the mREIT sector showing quarter-over-quarter weakness, but Invesco's was particularly bad. The company saw comprehensive losses attributable to common shareholders of $13.6 million, or $0.11 per share. Core earnings were $54.3 million, or $0.44 per share, but the company paid out $0.50 per share. They did not cover the dividend. Even with the new dividend of $0.45, it still wouldn't be covered. So this means that Q4 really has to be an improvement. If income fails to cover the dividend once again, it is not outside the realm of possibility that Invesco could see another cut. Despite the positives the company had in the recent quarter and the discount-to-book, I would still hold and wait for a few good quarters before putting more capital to work in this name.
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