Ellington (EFC) Says 40% Dividend Hike: Worth It?
Ellington FinancialEFC’s board of directors approved a 40% increase in the company’s monthly common stock dividend. The revised monthly dividend now stands at 14 cents per share from the previous figure of 10 cents. The amount will be paid on May 25 to shareholders of record on April 30, 2021.
Based on the last day’s closing price of $ 17.07 per share, the dividend yield is currently valued at 9.8%. This return is not only attractive to income investors but also represents a steady stream of income.
Although the dividend is slightly below the pre-pandemic level, Ellington increased the dividend twice in 2020. This reflects the bank’s commitment to return shareholder value through its strong cash generation skills. .
“I am pleased that the Board has increased our monthly dividend to $ 0.14 as we continue to see strong growth in our business, thanks to a greater flow of high yield loans from our origination programs.” said Laurence Penn, CEO and President. .
We believe that despite intense competition, the company has long-term upside potential based on its strong pipeline of loan acquisitions and strategic equity investments in loan origination companies.
Investors interested in this Zacks Rank # 3 (Hold) stock can take a look at the fundamentals and growth opportunities of the company. You can see The full list of current Zacks # 1 Rank (Strong Buy) stocks here.
Earnings: Ellington has experienced 9.2% profit growth in the past three to five years. This earnings momentum is expected to continue in the near term, as indicated by the company’s expected EPS (F1 / F0) growth rate of 3.1% and 6.6% for 2021 and 2022, respectively.
Income: The company’s organic growth looks impressive. Ellington’s revenue has registered a CAGR of 21.4% over the past five years (2016-2020). Driven by business growth efforts, the company’s revenue is expected to increase 3.7% in 2021 and 10.4% in 2022.
Leverage: Ellington currently has a debt-to-equity ratio of 2.95, above the industry average of 0.96. This shows that the company has higher leverage than its peers and, therefore, may not be financially stable under adverse economic conditions.
Return on equity (ROE): The company’s ROE of 9.91% compares unfavorably with the industry’s 10.72%, reflecting that it does not reinvest cash more effectively than its peers.
Price performance: Ellington shares have gained 35.5% in the past six months against a 14.3% decline in the industry it belongs to.
So based on the fundamentals mentioned above, the title seems worth hanging onto. While low rates continue to support mortgage companies, higher spending could hurt earnings growth to some extent.
Other financial actions taking similar action
In recent months, several financial companies have announced increases in their quarterly dividends. Some of them are Eagle Bancorp EGBN, OZK Bank OZK and Preferred bank CBFP.
Eagle Bancorp increased its quarterly dividend by 13.6%, while Bank OZK increased it by 0.9%. In addition, Preferred Bank announced a 26.7% increase in its dividend.
Top 10 Zacks stocks for 2021
In addition to the actions discussed above, would you like to know our top 10 buy and hold symbols for all of 2021?
Last year 2020Top 10 Zacks Shares the portfolio generated gains of up to + 386.8%. Now, a whole new portfolio has been selected from over 4,000 companies covered by the Zacks ranking. Don’t miss your chance to participate in these long term purchases.
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.