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Ellington (EFC) Announces Dividend Hike: Is It Worth a Look?

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Ellington Financial’s (EFC - Free Report) board of directors has approved a 7% hike in the company’s monthly common stock dividend. The revised monthly dividend now totals 15 cents per share compared with the previous figure of 14 cents. The amount will be paid out on Jun 25 to shareholders of record as of May 28, 2021.

Considering the last day’s closing price of $18.16 per share, the dividend yield is currently valued at 3.3%. The yield is not only attractive to income investors but also represents a steady income stream.

This marks the fourth dividend hike by the company in the past year. Prior to this, it hiked its dividend by 40% to 14 cents per share in April 2021. This reflects the bank’s commitment to return value to shareholders with its robust cash-generation competencies.

Investors interested in this Zacks Rank #3 (Hold) stock can have a look at the company’s fundamentals and growth opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings: Ellington has witnessed earnings growth of 9.2% in the last three to five years. This momentum is likely to continue in the near term as indicated by the company’s projected EPS growth rate (F1/F0) of 5.5% and 9.6% for 2021 and 2022, respectively.

Revenues: The company’s organic growth seems impressive. Ellington’s revenues witnessed a CAGR of 21.4% over the last five years (2016-2020). Driven by efforts to grow its business, the company’s top line is projected to be up 3.7% for 2021 and 10.4% for 2022.

Leverage: Ellington currently has a debt/equity ratio of 2.95, higher than the industry average of 1.02. This shows that the company has a higher debt burden when compared with peers and hence, might not be financially stable during adverse economic conditions.

Return on Equity (ROE): The company’s ROE of 9.63% compares favorably with the industry’s 7.58%, reflecting that it reinvests its cash more efficiently than peers.

Price Performance: Shares of Ellington have gained 33.5% over the past six months as against the  23.1% decline of the industry it belongs to.

Thus, based on the above-mentioned fundamentals, the stock seems worth holding on to. Though low rates continue to support mortgage companies, mounting expenses might hurt bottom-line growth to some extent.

Other Finance Stocks Taking Similar Actions

Over the past few months, several finance companies have announced hikes in their quarterly dividends. Some of these are Eagle Bancorp (EGBN - Free Report) , Bank OZK (OZK - Free Report) and Preferred Bank (PFBC - Free Report) .

Eagle Bancorp raised its quarterly dividend by 13.6%, while Bank OZK increased it by 0.9%. Furthermore, Preferred Bank has announced a 26.7% hike in its dividend.

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Preferred Bank (PFBC) - free report >>

Eagle Bancorp, Inc. (EGBN) - free report >>

Ellington Financial Inc. (EFC) - free report >>

Bank OZK (OZK) - free report >>