Ellington Financial (EFC) Lowers Quarterly Dividend 80.5% to $0.08, 4.1% Yield; Provides Business Update on COVID-19 Outbreak

April 8, 2020 6:56 AM EDT

Ellington Financial (NYSE: EFC) declared a quarterly dividend of $0.08 per share, or $0.32 annualized. This is an 80.5% decrease from the prior dividend of $0.41.

The dividend will be payable on May 26, 2020, to stockholders of record on April 30, 2020, with an ex-dividend date of April 29, 2020.

The annual yield on the dividend is 4.1 percent.

Business Update

Ellington Financial provided the following updates with respect to certain aspects of its portfolio, business operations, dividends, and liquidity, given the market-related and other impacts of COVID-19.

  • Book Value Per Common Share: As of March 31, 2020, estimated book value per common share1 was $15.08.
  • Common and Preferred Dividends: On April 7, 2020, the Company's Board of Directors (the "Board") declared a common stock dividend of $0.08 per share, payable on May 26, 2020 to stockholders of record as of April 30, 2020, and a dividend of $0.421875 per share on the Company's 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, payable on April 30, 2020 to preferred stockholders of record as of April 17, 2020. The Company paid its March monthly dividend of $0.15 per common share in cash, on March 25, 2020 as originally declared.
  • Liquidity: As of March 31, 2020, the Company had unrestricted cash of approximately $130 million.
  • Unencumbered Assets: As of March 31, 2020, in addition to its unrestricted cash, the Company had other unencumbered assets of an estimated $286 million.
  • Leverage and Financing: As of March 31, 2020, the Company's total debt-to-equity ratio and recourse2 debt-to-equity ratio had declined to an estimated 3.5:1 and 2.5:1 from 3.8:1 and 2.6:1, respectively, as of December 31, 2019. Adjusted for borrowings associated with unsettled purchases and sales, the Company's total debt-to-equity ratio and recourse debt-to-equity ratio were an estimated 3.1:1 and 2.1:1 as of March 31, 2020, as compared to 3.8:1 and 2.6:1, respectively, as of December 31, 2019. As of March 31, 2020, nearly half of the Company's recourse borrowings were secured by agency pools. The Company has satisfied all of its margin calls under its financing arrangements.
  • Strong Alignment of Interests: Management and directors continue to own approximately 8%3 of the Company's fully-diluted common equity as of March 31, 2020.

"The spread of COVID-19 has led to extreme market volatility and dislocations in the financial markets, which have in turn caused significant yield spread widening on most fixed income assets, a sharp selloff in equities across the globe, volatility in interest rates, a severe drop in liquidity across virtually all asset classes, and significantly less transparency in the pricing of many asset classes," said Laurence Penn, Chief Executive Officer and President of the Company. "While responses from central banks and governments around the globe have been substantial, the ultimate economic impact of the virus is still unknown, and the situation is evolving on a daily basis.

"Through the volatility, we have met all margin calls, strategically lowered our leverage, and maintained what we believe is a strong liquidity position. The lowering of our leverage has been strategic and opportunistic; none of our asset sales have been forced. In addition, the Board has set our next common stock dividend to $0.08 per share, largely in response to our anticipated net taxable loss for the first quarter and our estimated book value decline. The Board will continue to assess our common stock dividend rate on an ongoing basis, as market conditions and our financial position continue to evolve. Looking forward, we believe that the opportunities for future returns are strong given the significant repricing across most of our targeted asset classes, where we see substantial yield spread widening even after taking into account the anticipated fundamental credit effects of recent macro-economic developments. While the markets for many of our assets and the financing of those assets seem to have improved in recent days, high levels of uncertainty remain in the current environment.

"Finally, our leadership team has effectively implemented our business continuity plans, and we continue to be fully operational. Our thoughts and sincere wishes are for the health and well-being of all of our stakeholders and their families, and moreover to all those around the world who are suffering through this pandemic."

For a dividend history and other dividend-related data on Ellington Financial (EFC) click here.

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