Ellington (EFC) Says 40% Dividend Hike: Worth a Look?

Ellington FinancialEFC’s board of directors has 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 returning shareholder value through its strong generation skills. cash.

“I am delighted that the Board of Directors has increased our monthly dividend to $ 0.14 as we continue to experience strong growth in our business, driven by a greater flow of high yield loans from our programs. editing, ”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 view the fundamentals and growth opportunities of the company. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today 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 projected EPS growth rate (F1 / F0) of 3.1% and 6.6% for 2021 and 2022, respectively.

Income: The company’s organic growth looks impressive. Ellington’s revenue has seen 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% for 2021 and 10.4% for 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 the fact that it does not reinvest cash more effectively than its peers.

Price performance: Shares of Ellington have gained 35.5% in the past six months against a 14.3% drop in the industry to which it belongs.

So, based on the fundamentals mentioned above, the title seems worth keeping. While low rates continue to support mortgage companies, increased spending could hamper 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.

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