Mortgage real estate investment trust (mREIT) Two Harbors (TWO 0.73%) has declared a set of new quarterly dividends, most notably for its common stock. Holders of that security will receive $0.14 per share from their company, payable on Oct. 29 to investors of record as of Oct. 1. At the current share price, this yields 10.9%.
As Two Harbors is a mREIT, its profitability can vary widely from quarter to quarter. And since, as a REIT, it is required to distribute at least 90% of its net earnings as shareholder dividends, its payout can also fluctuate, often violently. That said, this new amount matches the previous distribution; before that, it was $0.05 per share, having been cut from the preceding $0.40.
However, in a written announcement, the mREIT sounded an optimistic note about coming dividends:
We believe that our portfolio is capable of generating future gross returns in the low-to mid-double digits, as we further deploy capital, increase leverage and reduce expenses ... As a result, we expect to be in a position to moderately increase our fourth quarter dividend to a level that reflects our economic return expectations, dependent on market conditions and actual results.
It did not get more specific.
mREITs -- which invest in mortgages rather than actual real estate, as do equity REITs -- have not necessarily been popular investments of late. Many investors are worried about widespread mortgage-payment defaults due to the economic damage wrought by the coronavirus pandemic.
In late afternoon trading Tuesday, Two Harbors shares were up marginally but were being outpaced by the S&P 500 index.