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Cherry Hill Mortgage's Dividend Sustainability Analysis (Includes Q2-Q4 2019 Dividend Projection And Recommendation)


  • This article analyzes CHMI’s dividend sustainability through the end of 2019 by providing taxation metrics based on recent and projected quarterly results.
  • I believe this analysis has a heightened level of importance due to recent trends within the mREIT sector (mainly AGNC’s and NLY’s recently announced dividend decrease).
  • Test 1 analyzes CHMI’s quarterly estimated core earnings while Test 2 analyzes the company’s cumulative undistributed taxable income.
  • This article also provides direct, factual evidence as to why CHMI declared a special periodic dividend during the fourth quarter of 2016 and 2018.
  • My projected CHMI dividend per share rate for Q2-Q4 2019 and buy, sell, or hold recommendation are stated in the “Conclusions Drawn” section of the article.

Focus of Article:

The focus of this article is to provide a detailed analysis with supporting documentation on the “most probable/suitable” quarterly dividend per share rate Cherry Hill Mortgage Investment Corp. (NYSE:CHMI) will/should declare for the remainder of 2019 (Q2-Q4 2019). I decided to cover this topic due to the number of readers who have specifically requested such an analysis be specifically performed on CHMI in light of recent sector earnings. For readers who just want the summarized conclusions/results, I would suggest to scroll down to the “Conclusions Drawn” section near the bottom of the article.

Understanding the tax and dividend payout characteristics of CHMI will provide investors with an overall better understanding of the mortgage real estate investment trust (mREIT) sector as a whole. Due to the fact CHMI has produced an annualized dividend yield of at least 10% since the company’s initial public offering (“IPO”) in 2013, many investors have chosen this stock (and other sector peers) for an income-producing equity investment. From reading this article, investors will better understand how a qualified real estate investment trust (“REIT”) per the Internal Revenue Code (“IRC”) comes up with an entity’s current dividend per share rate and specific signs when an increase or decrease should be implemented.

I will be performing two dividend sustainability tests within this article. These tests will be termed “TEST 1” and “TEST 2”. At the end of this article, there will be a conclusion regarding my personal projection of CHMI’s dividend per share rate for the second-fourth quarters of 2019 and the probability of another special periodic dividend in 2019. I will also include my BUY, SELL, or HOLD recommendation and current price target on CHMI.

Estimated Core Earnings (“ECE”) Overview:

Before we begin CHMI’s dividend sustainability and projection analysis, let us briefly get accustomed to

This article was written by

Scott Kennedy profile picture
Leader of The REIT Forum
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Note: I am currently "teaming up" with Colorado Wealth Management to provide weekly CURRENT BV and NAV per share projections on all 20 mREIT and 15 BDC stocks I currently cover. These very informative (and “premium”) projections are provided through Colorado's S.A. Marketplace service, The REIT Forum. In addition, this includes additional data/analytics, continuous sector recommendations (including ranges), and exclusive mREIT and BDC "rapid fire" chat notes immediately after earnings (followed by subsequent earnings assessment articles).

Below are the stocks I currently cover (as of Spring 2023):


I cannot cover ABR or STWD in the mREIT sector due to indirect conflicts of interest.

Note: So, readers have continued to reach out and ask what I provide within Colorado Wealth Management’s Marketplace Service, the REIT Forum. I provide the following benefits vs. what I provide to the public:

1) Quarterly earning assessments of all 35 mREIT + BDC peers I cover. This includes rapid-fire "chat notes" the same day of earnings for each covered stock; followed by a detailed assessment article.

2) Subscribers can ask questions / engage in discussions with me daily via the REIT Forum chat feature (each weeknight and during the day on weekends). I answer all questions on the two sectors I cover. The REIT Forum’s chat feature takes precedence over my public responses and personal messages from non-subscribers.

3) Each week, I/we provide a “weekly recommendation” article (with tables for illustrative purposes) so readers can quickly find out which mREIT and BDC stocks have moved “in and out” of my BUY, SELL, or HOLD recommendation range. I believe this is highly valuable information that can lead to enhanced total returns or minimize an investor’s total losses.

4) For my mREIT articles, subscribers get “early looks” for all public articles I provide. This typically ranges from 1-3 days prior to public publication. For investors looking to “jump on” some of my ideas, prior to the general public being aware of such ideas, this is valuable.

5) Within the REIT Forum mREIT articles, subscribers are provided with one, or a combination of, the following benefits: a) additional tables; b) additional topics; and/or c) sector recommendation tables which are updated weekly using my CURRENT projected BVs for all 20 sector peers I cover. This includes access to sector “risk ratings”.

6) For my BDC articles, subscribers get “early looks” at all public articles I provide. This typically ranges from 1-3 days prior to public publication. For investors looking to “jump on” my ideas, prior to the general public being aware of such ideas, this is also valuable.

7) Within the REIT Forum BDC articles, subscribers are provided with one, or a combination of, the following benefits: a) additional tables; b) additional topics; and/or c) sector recommendation tables which are updated weekly using my CURRENT projected NAVs for all 15 sector peers I cover. This includes access to sector “risk ratings”.

8) I provide, for each BDC I cover, risk ratings on over 1500+ underlying portfolio companies. In addition, I provide monthly credit upgrades / downgrades on specific underlying portfolio companies. By having access to this valuable information, subscribers are provided “an edge” when it comes to assessing future BDC performance (which directly impacts stock price valuations).

9) I provide “real-time” chat messages regarding all purchase and sale decisions I make within my personal portfolio for the two sectors I cover. In the past, I have provided such disclosures, for free, via the StockTalks feature of S.A. (for transparency and credibility). However, since this provides additional value for subscribers, I “transitioned” these real-time disclosures to subscribers of the REIT Forum. I will continue to disclose publicly all stock purchase and sale decisions. However, they will only be within each applicable sector article which won’t be in real-time (could be a few days later or could be a few weeks until readers see what moves I made outside the REIT Forum).

I hope this provides some additional clarity on what I specifically provide to Colorado’s the REIT Forum Marketplace service.

Summer 2017 PRO Promotion Recipient

StockTalk Unrealized/Realized Gain "Success Rate" as of 2/29/2023 (63 Past and Present mREIT + BDC Positions): 86.2%

StockTalk Total Return "Success Rate" as of 5/31/2022: 92.3%

I am a Certified Public Accountant (CPA) and Certified in Financial Forensics (CFF). I have also been a member of the American Institute of Certified Public Accountants (AICPA) for 24 years. My current title is partner at a national accounting firm. I have audit, tax, and consulting experience with entities in the following sectors: closed-end funds, energy, financials, healthcare, homebuilders, pharmaceuticals, private equity, REITs, and telecoms. I also have experience with C-corps., estates, high net worth individuals, LLCs, LLPs, S-corps., and trusts. I am an active investor. My investing fundamentals are based on both qualitative and quantitative information. By using my financial / analytical skills, I create specific investing ideas / strategies based on valuations and total returns. The two main sectors I currently provide articles on are mortgage real estate investment trusts (mREITs) and business development companies (BDCs).

Disclaimer: I cannot own and will not give an opinion on any investments my current employer has any direct or indirect professional services with (accounting, audit, tax, consulting, etc.). As such, most large-cap stocks are "off the table" regarding my articles. All accounting insight, analysis, and opinions stated within any articles I write (in regards to a specified stock) are entirely from my own personal research and analysis. I believe my articles are both informative and in some cases educational.

Note: A growing number of readers/investors, analysts, and representatives of firms have requested to be provided with my "spreadsheets/models" to help better understand certain companies/sectors. My researched data is several files of 350+ spreadsheets/models containing both stocks I write about on S.A. and stocks I choose to not write about on S.A. To reduce the repeated requests to provide such data, these spreadsheets/models are ALL linked together. As such, all current and future requests to "share" my data/models will be politely declined. Thanks for your understanding regarding this matter.

I appreciate my loyal readers and I’ll continue to try to provide high quality, in-depth articles.

Commonly Asked Questions:

Question 1): If you are only paid per article, why make your articles so long / detailed?

- I like to provide the “nuts and bolts” of a company. As such, I strive for my articles to have some sort of “hard to obtain” facts / figures. From this data, I like to fully discuss / analyze specific topics within a particular stock. This mainly consists of a quarterly projection article and a series of articles on a company’s dividend sustainability. In certain instances, I also write articles in regards to specific, material events that occur during a quarter.

- I believe a company’s quarterly results and upcoming dividend declarations are two of the most important topics readers are requesting information on. My analysis takes the “average” article several steps further to allow readers to have access to information that is rare to public viewership.

Question 2): How come you only write 1-2 articles a week (would like to see more)?

- As stated in my profile above, I have a full-time professional career. I write / analyze stocks in my free time. To provide these types of high quality / in-depth articles, I can’t see writing more than 2 articles a week. I believe “quality” should always be a higher priority versus “quantity”.

- As many readers should know by now (if you’ve followed me for a while), I'm not here for the monetary rewards. If that was the case, I’d write 5+ weekly articles and provide little to no engagement in each article’s comment section. I believe the comments section is as important as the article themselves b/c readers have a wide range of questions in relation to each article or the sector in general.

Question 3): What do you personally gain from writing these articles?

- I am not here trying to promote a company, book, or website. There’s nothing wrong with that. That’s just not what I’m about. I’m here for the “average Joe”.

- When I decided to write these articles, I based it on the notion I am filling a “special niche” per se. Using skills that have been built up over my professional career, my articles usually provide unique information that most writers either a) don’t have the technical expertise to provide or b) don’t bother providing due to the time it takes to compile such data. As such, I believe the S.A. community benefits from my articles. I solely do this b/c it’s a passion of mine and I like helping readers have accurate, reliable data that is not readily available. Yes, I understand this may seem “hard to believe” in this day and age.

Question 4): How come you do not write about more stocks?

- To give readers the level of detail that I provide in my articles, I amass large amounts of data every quarter (or even weekly). As a direct result, a large amount of time is consumed by obtaining / analyzing this data.

- If I expanded the stocks I research, it would most likely take away the quality of other articles I currently am writing about. Again, this gets back to the “quality vs. quantity” metric.

- There is a fairly large range of stocks / investment vehicles I cannot write about / provide an opinion on due to various conflicts of interests (regarding my professional career). This is a topic I take VERY seriously.

Analyst’s Disclosure: I am/we are long CHMI, CHMI.PA, ARR, GPMT, IVR, MITT, NRZ, NYMTN, TWO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I currently have no position in AGNC, MORL, NLY, NYMT, ORC, REM, or TWO.PB.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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