NRZ is a is a leading provider of capital and services to the mortgage and financial services industries. It’s a mortgagee REIT. Like mentioned in my previous post about REITs, the rules for REITs play differently in terms of dividends. It released its quarterly earning yesterday and is up 10%. Let’s discuss why they are up 10% in a day:
Overview
💪🏽 Strength and balance
🧠 $1.7B Cash
🔮 Future expectations
💪🏽 Strength and balance
Mortgage REITs (mREITS) provide financing for income-producing real estate by purchasing or originating mortgages and mortgage-backed securities (MBS) and earning income from the interest on these investments. mREITs help provide essential liquidity for the real estate market. These are important yet scary stuffs. The summery of financials of the Q1, 22’ is as follows.
GAAP net income of $661.9 million, or $1.37 per diluted common share
Core earnings of $177.4 million, or $0.37 per diluted common share
Common dividend of $116.7 million, or $0.25 per common share
Book value per common share of $12.56
The numbers look strong. They have interest-rate hedges in place that make is a secured investment. Also, their ability to pay dividends to its investors at 9.1% dividend yield for over 11 years is impressive. They have paid over 4 billion dollars in dividends alone. Overall the numbers look strong despite being in a scary environment for mortgage based companies.
🧠 $1.7B Cash
The best thing about their financial statement is $1.7B cash and liquidity levels. Which, in the current scenario is a huge plus for NRZ. A combo of $1.7B cash and their ability to manufacture assets is what sets them apart and will give open new opportunities for them.
A good example given by Michael Nierenberg about deploying capital is:
It will definitely bring more cash to the business and thus to the investors in the form of dividends.
🔮 Future expectations
This is the expectations I have from the company and might not necessarily come true. I expect the following:
Increase dividends to 50c per share
Deploy the cash into the market as it gets worse and more opportunity arises
Result of inflation and interest-rate hedges will be proven soon
Takeaways from this post:
NRZ has solid numbers
NRZ has solid plan for worsening mortgage market
I expect the dividends to reach 50c per share by the end of 2022