New York Mortgage Trust, Inc. (NYMT), American Capital Mortgage Investment Crp (MTGE), Newcastle Investment Corp. (NCT): Are Your Dividends Sustainable?

Dividend in danger?

Newcastle Investment Corp. (NYSE:NCT) is another mortgage REIT which was able to increase its quarterly dividend 10% during the prior year. Currently, the company is yielding 16.3% on its quarterly dividend rate of $0.22 per share. Besides, the company is trading in proximity to its 52-week low at a significant discount of 24% to its most recent book value.

The company invests in excess mortgage servicing rights (MSRs), non-Agency RMBS, CMBS, and other commercial real estate debt. Going forward, I believe the company will benefit from a shift towards senior housing and away from commercial real estate.

Using the past four quarters’ financial disclosures, I arrive at an average cash dividend coverage ratio of 0.77 times. This clearly means that Newcastle Investment Corp. (NYSE:NCT) is not making enough cash through its regular operations to maintain its current dividends. Therefore, you can expect a dividend cut at Newcastle Investment Corp. (NYSE:NCT).

Conclusion

The above analysis leads me to recommend American Capital Mortgage Investment Crp (NASDAQ:MTGE) and New York Mortgage Trust, Inc. (NASDAQ:NYMT) as they both have enough financial muscle to maintain their current dividends. In contrast, I recommend income oriented investors stay away from Newcastle Investment Corp. (NYSE:NCT) as the company may experience a dividend cut.

The article Are Your Dividends Sustainable? originally appeared on Fool.com and is written by Adnan Khan.

Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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