On Wednesday, BTIG reaffirmed its confidence in Ellington Financial Inc. (NYSE:EFC), maintaining a "Buy" rating and a price target of $13.50. Ellington's substantial 13% dividend yield was highlighted as particularly appealing when compared to other mortgage lenders and real estate investment trusts (REITs). The firm's positive outlook is partly based on the potential for Ellington's unrealized losses to recoup value if interest rates continue to decline.
Ellington reported holding $1.5 billion in non-qualified mortgage (non-QM) loans with $218 million in gross unrealized losses as of the end of March, which translates to roughly $2.50 per share. BTIG attributes these losses primarily to the increased volatility in interest rates rather than to higher anticipated credit losses. This distinction suggests that the current valuation of Ellington's portfolio may improve should the interest rate environment stabilize or improve.
BTIG further notes that Ellington offers investors lower risk due to greater diversification on its balance sheet. This is an important factor for investors, especially in a market that appears to be conducive to applying repurchase agreement (repo) leverage to non-Agency loans and subordinate securities. According to the firm, these elements are significant contributors to Ellington's return profile.
InvestingPro Insights
Ellington Financial Inc. (NYSE:EFC) presents a compelling case for investors seeking a blend of growth and stability. With a market capitalization of $1.02 billion and a robust revenue growth of 114.63% in the last twelve months as of Q1 2024, the company stands out in its sector. The InvestingPro Tips highlight that Ellington is expected to grow its net income this year and has been profitable over the last twelve months, offering reassurance about its financial health. Additionally, the company's ability to maintain dividend payments for 15 consecutive years, coupled with a significant dividend yield of 12.98%, makes it an attractive option for income-focused investors.
Despite some analysts revising their earnings downwards for the upcoming period, Ellington's strong fundamentals are evident in its P/E ratio of 17.27 and a PEG ratio of 0.1, signaling potential for further growth. Moreover, the company's liquid assets surpass short-term obligations, ensuring financial resilience. For those interested in deeper insights, InvestingPro offers additional tips on Ellington Financial Inc., which can be accessed at https://www.investing.com/pro/EFC. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of InvestingPro Tips that can guide your investment decisions.
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