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Wunderlich Upgrades Western Asset Mortgage To Buy, Likes Sustained Dividend

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Wunderlich Upgrades Western Asset Mortgage To Buy, Likes Sustained Dividend

Wunderlich has upgraded Western Asset Mortgage Capital Corp (NYSE: WMC) to Buy from Hold on sustained dividend and lower volatility in book value per share (BVPS).

After six successive quarterly dividend cuts, the company announced in late June a second-quarter dividend of $0.31, and Wunderlich believes this dividend could be sustainable for the subsequent six quarters. Further, the company reported that BVPS improved to $11.01, up by $0.11/share quarter-over-quarter.

"We think a stable dividend can attract investor interest, particularly in a low interest rate environment. Stability in BVPS is harder to maintain, but lowering leverage lowers risk and WMC has done that," analyst Merrill Ross wrote in a note.

Related Link: Bankrate: Mortgage Rates Slump On News Of Disappointing Economic Growth

Western Asset has been rotating out of agency MBS into non-agency MBS and CMBS, in addition to whole loans. The analyst said this strategy could improve asset yields.

Ross also raised the price target to $11 from $9.50.

"At our price target, the shares would trade to yield over 11 percent, which could be conservative, but we think the market will continue to discount the stability in the dividend for a while, given the recent track record of the company," Ross added.

Shares of Western Asset closed Thursday's regular trading session at $10.19.

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Latest Ratings for WMC

DateFirmActionFromTo
Sep 2020B of A SecuritiesDowngradesNeutralUnderperform
May 2020B of A SecuritiesMaintainsNeutral
Sep 2019Bank of AmericaReiteratesBuy

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