Image source: Western Asset Mortgage Capital.

What: Shares of Western Asset Mortgage Capital Corp. (NYSE:WMC) were down by more than 10% as of 2:50 p.m. ET after a disappointing fourth-quarter earnings report.

So what: The mortgage real estate investment trust revealed a net loss of $0.49 per share for the fourth quarter, driven by marks to its investment book. Notably, the company earned $0.39 in "core earnings plus drop income" per share, which excludes gains and losses on the value of its mortgage-backed securities.

Both measures of earnings failed to cover its $0.58 quarterly dividend it paid during the fourth quarter. The company reported that book value fell to $12.21 per share, down from $13.26 per share in the third quarter.

Now what: Investors are pricing the company for consistent underperformance and perhaps a dividend cut going forward. Western Asset Mortgage Capital noted in a presentation that since its 2012 IPO it has delivered a 24.5% economic return on book value. Unfortunately, due to its shrinking premium to book value since going public, investors have seen annualized returns of little more than 2% annually since its IPO. 

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