Phillip Kardis: Sure. Thanks. EAD is one of the metrics. It’s not the only metric. And at times, it’s a good measure for certain aspects, but not 100% foolproof. So I think the Board looks at a variety of factors, including the total cash that the portfolio is generating, some of which just is not captured in the EAD metric. We also bear in mind, as I mentioned, that we have equity in our securitizations. And so depending on the timing and what our needs are, we may tap that from time to time. So we have all those factors go into it when we think about — or when the Board thinks about the dividend. And so they were — given where the portfolio is, they were comfortable with declaring the first quarter dividend at 2023 despite where EAD is at the present moment.
Trevor Cranston: Okay. Appreciate the comments. Thank you.
Phillip Kardis: Sure. No problem.
Operator: The next question is coming from Lee Cooperman of Omega Family Office. Please go ahead.
Lee Cooperman: Thank you very much. I’ll just make an observation. You said you’re a student of history. Any student of history would know interest rates were going up. Why weren’t you not hedged earlier than now?
Phillip Kardis: That is something that, in hindsight, though, the company should have done. I mean that — we’re right now relooking on a go-forward basis. I mean, we have had a change in leadership. We do have a vision of where we’re going. We do have a structure and a strategy with respect to hedging versus our longer term financing. And so that’s where we are. I am a student of history. But to be frank, that is in our past, and what we’re focusing on is fixing it and moving forward.
Lee Cooperman: All right. So it was a question that was previously asked, but you talked around, and the way you want to run the company was a reasonable return on equity for us to generate on our $7.49 of book value.
Phillip Kardis: It’s really our dividend return, 10%, 12%-ish range.
Lee Cooperman: Well, 10% return on equity wouldn’t do it. 10% return on equity would be a $0.75 dividend that would imply a cut.
Subra Viswanathan: This is Subra. Historically, the dividend yields on our stock has been around 10% to 12%, and that’s where we expect our dividend to — where our investments are currently yielding, and that’s where we see the dividends to be as the return on capital to be expected from the stock.
Lee Cooperman: So what are you saying then? Return on equity determines the distributable income, which will determine the dividend. So you’re saying that the return on equity should be 10% to 12%?
Subra Viswanathan: Yeah.
Lee Cooperman: Right. Okay. That would imply the dividend is kind of iffy at this level, that should we assume our shareholders that there’s a good chance the dividend might be reduced in the next 12 months, or do you think the dividend is likely maintained?
Phillip Kardis: No. I think, right now, we feel where the dividend where our portfolio is, in terms of throwing off cash and the new investments we’re making. It’s hard to predict where the future is in terms of the markets and potential dark clouds that we talked about. But right now, we feel good about that $0.23 dividend.
