It’s no secret that Fannie Mae (NYSE:FNM) has been in trouble, and this afternoon we just found out some more of what we have been expecting. The troubled GSC is cutting its quarterly dividend by 30% down to $0.35 per quarter from $0.50. It is also apparently raising some $7 Billion in preferred securities sales after a strong reception to a previous offering.
The dividend cut really isn’t this big of a shock even if the reports are "Breaking News" and "News Flash" stories. This stock has performed so poorly that the dividend was now over 5%.
We noted just last week how Rich Pzena had labeled Fannie’s brother GSC company Freddie Mac (NYSE: FRE) as a great long-term value stock after its meteoric drop as well.
Fannie Mae shares closed down almost 3% at $35.18 today and shares are down about 3% more at $33.95 or thereabouts in after-hours trading. The 52-week trading range is $26.38 to $70.57, so it is still down more than 50% from the year highs.
Freddie Mac (NYSE: FRE) closed down 3.6% today at $32.31, and it is down 1.5% at $31.82 after the close in sympathy with sister Fannie. Its 52-week trading range is $22.90 to $69.85, so it too is down over 50% from the highs of the year. Freddie’s dividend is roughly 3%.
Don’t be too shocked when these dividend cuts start happening at the major banks as well, despite what the media pundits are saying.
By the way, Fannie Mae is guilty of a REG. FD violation here. They sent this out to selective newswires and didn’t issue a press release and didn’t update this on their website. Of course with so many troubled mortgages the SEC is going to let this slide (particularly as this is a quasi-agency too), but companies have a legal obligation to issue their statements in an "equally accessible manner" so that investors big and small have access to information. Their press release came out after 5:00 PM on PRNewswire.
Jon C. Ogg
December 4, 2007
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