As I perused the Anworth annual report, I was struck by how much effort they put into describing their business in plain English.
Trust me, it’s hard to describe even this relatively simple part of the bond business in easily understood sentences, at least if you try to be accurate.
Since this is my largest holding (could change, but for now, that’s how it is), I thought I might share some observations.
First, let me remind people that REITs operate under a calendar for dividends and dividend declaration that leads to some of them declaring first quarter dividends up to four months after they declared their fourth quarter dividend the prior year.
This is offset by those same companies declaring their fourth quarter dividend as little as two months after the third quarter, but it seems that every year some shareholders look at the declaration date from the prior December, and complain that the first quarter declaration is “late” when it doesn’t happen three months later.
Anworth is one of those companies. REIT rules put the companies on a December 30 year-end, and count the 4th quarter dividend toward the 90% taxable income distribution requirement only if the declaration and record dates are before December 30.
Even if a company would want to get audited results for a quarter before declaring a dividend, they just don’t have that choice about the 4th quarter. It isn’t even finished when they have to make the commitment.
In the past, Anworth has declared their first quarter dividends anywhere from mid-April to the very end of the month. I imagine the year they delayed until the end of April was in the yar (2004) that hedge accounting rules changed.
Is it frustrating to watch the other amREITs declare while I wait? You bet. Are they late? No.
While we wait, I recommend reading the President’s letter beginning on the third page of the report. It is by far the easiest-to-understand description of the amREIT business model that I’ve seen.
Having been called upon to write accurate but simple descriptions of bond market strategies myself, I can tell you that it is not an easy thing to do.