Comments on: Dividend Analysis - Washington Mutual Inc (NYSE:WM) http://www.dividendsmatter.com/dividend-analysis-washington-mutual-inc-nysewm/2007/07/05/ Everyone else gets paid. Why shouldn't you? Sun, 07 Sep 2008 17:59:42 +0000 http://wordpress.org/?v=2.2 By: Ben Green http://www.dividendsmatter.com/dividend-analysis-washington-mutual-inc-nysewm/2007/07/05/#comment-69 Ben Green Tue, 10 Jul 2007 21:24:07 +0000 http://www.dividendsmatter.com/dividend-analysis-washington-mutual-inc-nysewm/2007/07/05/#comment-69 Dividend payout ratio of 66% may be misrepresenting the fundamentals a bit. A large portion of WAMU's net income is not even cash earnings but instead just negative amortization interest accruals to the Option ARM loan balances. If you focus instead on the actual cash earnings, the dividend payout ratio over the past few quarters has been higher than the cash brought in, with WAMU borrowing or selling assets to pay for the dividend, or worse still, spending down existing cash reserves on the dividend when it should be held as reserves in preparation for potential hardtimes ahead in the loan market. Full disclosure: Short WAMU Dividend payout ratio of 66% may be misrepresenting the fundamentals a bit. A large portion of WAMU’s net income is not even cash earnings but instead just negative amortization interest accruals to the Option ARM loan balances.

If you focus instead on the actual cash earnings, the dividend payout ratio over the past few quarters has been higher than the cash brought in, with WAMU borrowing or selling assets to pay for the dividend, or worse still, spending down existing cash reserves on the dividend when it should be held as reserves in preparation for potential hardtimes ahead in the loan market.

Full disclosure: Short WAMU

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