Capstead Mortgage shares fell after company cuts dividend for 5th straight quarter

Capstead Mortgage shares fall on dividend cut

NEW YORK — Shares of Capstead Mortgage Corp. fell Friday after the real estate investment trust cut its dividend for the fifth straight quarter.

THE SPARK: Late Thursday, Dallas-based Capstead declared a third-quarter dividend of 26 cents, payable Oct. 20, to shareholders of record as of Sept. 30. That’s down 28 percent from the second-quarter dividend of 36 cents, and less than half the 56-cent dividend paid in the third quarter 2009.

THE BIG PICTURE: Capstead invests almost exclusively in residential adjustable-rate mortgage securities issued and guaranteed by government-sponsored mortgage buyers Fannie Mae, Freddie Mac and Ginnie Mae. The company said in a regulatory filing accompanying its dividend declaration that “portfolio yields and financing spreads are expected to trend lower in the third quarter” before improving a bit in the last three months of the year.

THE ANALYSIS: Sterne, Agee analyst Henry J. Coffey Jr. said he expected a 36-cent dividend. In a note to clients he said the company pegged the cut to issues related to the Fannie and Freddie clearing a backlog of mortgages, but suggested that Capstead’s strategy on adjustable rate mortgages with short resets may be an underlying issue, given falling rates. He reduced his earnings forecasts for 2010 to profit of $1.45 per share, from $1.65 per share, and for 2011 to $1.45 per share from $1.60.

Analysts polled by Thomson Reuters, on average, expect earnings of $1.65 per share for this year and $1.60 per share for next year.

SHARE ACTION: Capstead Mortgage stock lost 50 cents, or 4.2 percent, to $11.31 with volume approaching twice normal daily trading activity. The stock has moved between $8.12 and $15.75 in the past 52 weeks.