Assessing the Sustainability of TWO's Dividend Profile
Two Harbors Investment Corp(TWO, Financial) recently announced a dividend of $0.45 per share, payable on 2024-04-29, with the ex-dividend date set for 2024-04-03. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Two Harbors Investment Corp's dividend performance and assess its sustainability.
What Does Two Harbors Investment Corp Do?
Two Harbors Investment Corp is a real estate investment trust primarily focused on investing in, financing, and managing residential mortgage-backed securities, or RMBS; residential mortgage loans; mortgage servicing rights; and commercial real estate. The majority of the company's investment portfolio is split between agency RMBS purchased from government-sponsored enterprises and nonagency RMBS. Two Harbors derives nearly all of its revenue in the form of interest income collected from its investments. Most of this income is generated by available-for-sale securities, while residential mortgage loans held for investment in securitization trusts also contribute a sizable amount.
A Glimpse at Two Harbors Investment Corp's Dividend History
Two Harbors Investment Corp has maintained a consistent dividend payment record since 2009. Dividends are currently distributed on a quarterly basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Two Harbors Investment Corp's Dividend Yield and Growth
As of today, Two Harbors Investment Corp currently has a 12-month trailing dividend yield of 14.79% and a 12-month forward dividend yield of 13.61%. This suggests an expectation of decreased dividend payments over the next 12 months.
Over the past three years, Two Harbors Investment Corp's annual dividend growth rate was -9.10%. Extended to a five-year horizon, this rate decreased to -26.00% per year. And over the past decade, Two Harbors Investment Corp's annual dividends per share growth rate stands at -16.60%.
Based on Two Harbors Investment Corp's dividend yield and five-year growth rate, the 5-year yield on cost of Two Harbors Investment Corp stock as of today is approximately 3.28%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Two Harbors Investment Corp's dividend payout ratio is 0.00.
Two Harbors Investment Corp's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Two Harbors Investment Corp's profitability 3 out of 10 as of 2023-12-31, suggesting the dividend may not be sustainable. The company has reported net profit in 7 years out of the past 10 years.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Two Harbors Investment Corp's growth rank of 3 out of 10 suggests that the company has poor growth prospects and thus, the dividend may not be sustainable.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Two Harbors Investment Corp's earnings increased by approximately 65.70% per year on average, a rate that outperforms approximately 89.06% of global competitors.
Next Steps
In conclusion, while Two Harbors Investment Corp's high dividend yield may attract income-focused investors, the negative dividend growth rates and low profitability and growth ranks raise concerns about the long-term sustainability of its dividend payments. The company's robust 3-year EPS growth rate provides a glimmer of hope, suggesting potential for future earnings and dividend stability. Investors should weigh these factors carefully and monitor the company's upcoming financial performance to make an informed decision. For those seeking to diversify their portfolio with high-dividend yield stocks, GuruFocus Premium users can explore opportunities using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
