Core Viewpoint - MFA Financial is a specialty finance REIT with a long history of dividend payments, but its current high yield raises concerns about the sustainability of its dividends due to poor earnings coverage and elevated leverage [2][4]. Financial Metrics - The annual dividend is $1.44 per share, resulting in a dividend yield of 14.8% [3]. - The most recent dividend increase was 2.9% in Q1 2025, marking a stable period from 2023 to 2025 [3]. Earnings and Payout Ratios - For Q3 2025, the company reported distributable earnings of $0.20 per share while paying out $0.36 per share in dividends, leading to a payout ratio of 180% [4]. - Over the trailing twelve months, earnings totaled $1.12 per share against dividends of $1.44, resulting in a payout ratio of 128.6% [4]. - The trailing twelve months (TTM) earnings payout ratio is 166.3%, deemed unsustainable [5]. Cash Flow Analysis - Operating cash flow for 2024 was $200.1 million, covering the $176.7 million dividend obligation at a ratio of 1.13x, indicating tight coverage [5]. - However, in the first nine months of 2025, operating cash flow dropped to $38.6 million against $140.5 million in dividends, yielding a coverage ratio of only 0.27x [5][7]. Leverage and Financial Health - As of Q3 2025, MFA's total debt stood at $6.60 billion against equity of $1.82 billion, resulting in a debt-to-equity ratio of 3.62x, which is considered elevated for a mortgage REIT [6]. - Cash on hand was limited at $305 million, covering only 4.6% of total debt [6]. - The company has negative retained earnings of -$1.88 billion, indicating cumulative losses exceed profits over time, suggesting dividends have been paid from capital rather than sustainable earnings [6]. Dividend History - MFA maintained a stable dividend of $0.20 per quarter from 2014 to 2019, but cut the dividend to $0.05 per quarter during the 2020 pandemic [8]. - The dividend gradually recovered to $0.35 per quarter by 2022 and remained stable through 2024, with a recent increase to $0.36 in Q1 2025 marking the first raise in three years [8].