Thornburg Mortgage (TMA) issued a statement Tuesday to revise its loss on the sale of securities from around $900 million to $1.1 billion on the sale of $22 billion of mortgage securities from the company’s portfolio. Shares of the stock skidded by about 10% as a result. I think the revised numbers have little or no effect on the ongoing prospects for TMA and the share price drop is without merit.
Primarily the asset sale was taken to payoff the loans that were used to fund the purchase of these securities. Put another way the assets were sold to pay off a like amount of debt. The fact that the securities were sold at a loss does not affect the ongoing prospects for the company. This is quite different from a company that spends more money than it takes in as revenue and thus books a loss. That company is spending more than it makes. Thornburg sold some assets to pay off debts. The loss on the assets should not affect the future profitability of the company.
Thornburg has reduced its assets and debts by about 1/3. The remaining assets should be adequate to provide a generous ongoing dividend. I expect the dividend to be in the 40 to 50 cent range and increasing from there as profitability improves. I believe any investor who buys at these prices and holds on for the next few quarters will be well rewarded.
This video shows someone who thinks the $.68 dividend will continue to be paid.
Disclosure: I am an owner of TMA.