Hey everyone,
I am trying to compare several REITs containing distressed mortgages that have pretty high dividend yields (>15%) and I need to figure out if these dividend payments are sustainable.
Can someone tell me how I should go about doing this? Which portions of their financial statements should I be looking at? what about the actual holdings themselves?
note: I'm an intern so excuse my ignorance lol
thanks!!!
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>15% is not sustainable. Build out a really "normal" year for them. Find their FCF and assume some percent is paid out. FCF sustainable would be EBITDA - Cash Tax - change in NWC (again recurring) - Maintenance / Required CapEx = FCF. Say 50-75% of that could be dividend. Put that value over market cap for %.
You clearly have no experience with reits, so dont answer the question if you dont know.
Hybrid or mortgage reits arent that common, and those are the only ones which would hold mortgages. All reits have have to pay out 90%+ of income as dividends (which is why they have high yields). because there has been a run up in reits this year, must are not yielding 15%, and the ones that are have a reason for it. I dont know how much detail youre looking for but a quick back of the envelope way is to calculate (A)FFO and then decide if think its multiple will grow or shrink where it is from now. If youre looking for more indepth ways, just ask
Thanks BCbanker.
Do you know if I should be exclude the interest on non-agency mbs from the EBITDA?
And how about any trends I should be looking for in the cash flow statements? For example, they had a huge receivable writedown that boosted their CFO number, big losses on derivatives, detriorating ending period cash & cash equivalents etc.
hmmm, not to sound like a dick, but this is a question you should be asking your boss or employer, even if you are an intern.
porter9900 sent u a pm
If you are looking for sustainable dividend than remove the effects of non-recurring items. The NWC effect for a growing company should always have a net effect of reducing FCF. The "Normal" change in NWC for a no growth company can be assumed at 0.
Noobstar, you are a joker. Income does not equal cash flow. I will admit that you should keep an eye on NI and the 90% rule, but the 90% has nothing to do with FCF.
Also I guess you want FCE so you don't have to add back interest. Also I want to shit on noob again, FFO is exactly what I said above dipshit.
btw BCbanker u are shitting on the wrong person since Im not the one that wrote the post you are referring to lol u should read before u talk dipshit
haha my bad. *mr1234 you are a dipshit.
i think you missed the context of my post, too. my post was for the original poster, not you. dipshit.
bump.
anyone else have any input?
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