Wunderlich Securities analyst Merrill Ross lowered herrating on Western Asset MortgageCapital Corp. to "sell" from "hold," expectinga cut in quarterly dividend.
Western Asset's first-quarter book value per share reducedby nearly 11% sequentially and first-quarter core EPS of 23 cents per share wassignificantly below her estimate, the analyst noted. The company's managementexpects core EPS to increase, but its "zero duration gap" indicatesthat core EPS will not support the 45-cent-per-share dividend for the first quarter,Ross said. She expects that quarterly dividend will likely decline to 30 centsper share to 35 cents per share from 45 cents per share.
"While we understand that pressure on [book value pershare] has resulted from technical factors, such as the widening of creditspreads, the pressure on dividends and [book valueper share] is just too hard to watch," Ross wrote in a May 10 note.
The analyst lowered her 2016 EPS estimates to $1.16 from$1.40. She also lowered her target price to $8 from $10.