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Ellington Residential Mortgage (EARN)
NYSE:EARN
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Ellington Residential Mortgage
(NYSE:EARN)
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Rating:60Neutral
Price Target:
$5.50
▲(25.86% Upside)
Action:ReiteratedDate:01/09/26
The score is held back primarily by inconsistent profitability and weak/negative free cash flow, despite balance-sheet improvement (zero debt) and constructive technical momentum. Valuation is supported by a moderate P/E and very high dividend yield, with recent corporate updates reinforcing dividend commitment.
Positive Factors
Improved Balance Sheet (Zero Debt)
Reporting no total debt in 2024 materially reduces refinancing and liquidity risk for an asset manager focused on mortgage assets. This strengthens financial flexibility to manage portfolio repositioning, absorb mark-to-market swings, and support distributions over the next several months.
Dividend Commitment & Coverage
Management’s repeated monthly dividend declarations and reported full coverage from net investment income indicate a governance preference for steady payouts and that recent portfolio changes are generating distributable income. That makes dividends more durable in the near-to-medium term.
Active Portfolio Management and Scale
Significant trading activity and portfolio growth demonstrate active portfolio management and market access. The ability to reposition holdings, trade frequently, and mix mezzanine/equity tranches supports yield enhancement and downside protection as a structural capability.
Negative Factors
Weak and Negative Free Cash Flow
Persistent negative free cash flow and erratic operating cash flows undermine self-funded dividend sustainability and limit buffer against market stress. Over months this can force asset sales or external financing, reducing strategic flexibility and increasing execution risk.
Inconsistent Profitability and Revenue Volatility
Historic swings from negative revenue to recovery and fluctuating net margins reflect earnings instability tied to market valuation changes and trading outcomes. That makes future distributable income and NAV performance less predictable for income investors over the next several months.
Exposure to Asset-Value and Spread Risk
With business anchored in RMBS/CLO exposures, moderate leverage and funding structure mean credit-spread widening or rate moves could materially affect NAV and earnings. Even absent formal debt, portfolio funding and mark-to-market risk can amplify losses and pressure distributions.
Ellington Residential Mortgage (EARN) vs. SPDR S&P 500 ETF (SPY)
Market Cap
N/A
Dividend Yield17.91%
Average Volume (3M)568.17K
Price to Earnings (P/E)―
Beta (1Y)0.94
Revenue Growth630.98%
EPS Growth234.98%
CountryUS
Employees150
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)0.21
Shares Outstanding37,600,000
10 Day Avg. Volume636,644
30 Day Avg. Volume568,170
Financial Highlights & Ratios
PEG Ratio-1.21
Price to Book (P/B)0.93
Price to Sales (P/S)3.55
P/FCF Ratio19.73
Enterprise Value/Market Cap10.00T>
Enterprise Value/Revenue8.97
Enterprise Value/Gross Profit68.02
Enterprise Value/Ebitda-63.33
Forecast
1Y Price Target
$5.50Price Target Upside25.86% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)1.05
Revenue Forecast (FY)$53.06M
Ellington Residential Mortgage Business Overview & Revenue Model
Company DescriptionEllington Residential Mortgage REIT, a real estate investment trust, specializes in acquiring, investing in, and managing residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS comprising non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. Ellington Residential Mortgage REIT was incorporated in 2012 and is based in Old Greenwich, Connecticut.
How the Company Makes MoneyEllington Residential Mortgage generates revenue primarily through the interest income earned from its portfolio of residential mortgage-backed securities and other mortgage-related assets. The company's revenue model is based on the spread between the income generated by its assets and the cost of financing those assets, which often involves leveraging its investments through repurchase agreements and other forms of debt. Key revenue streams include interest income, gains from the sale of mortgage securities, and management fees. Additionally, strategic partnerships with financial institutions and investment firms may enhance EARN's access to capital and investment opportunities, further contributing to its earnings.
Ellington Residential Mortgage Earnings Call Summary
Earnings Call Date:Mar 04, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:May 04, 2026
Earnings Call Sentiment Neutral
The call conveyed a mixed but pragmatic tone: management acknowledged significant near-term losses driven by severe CLO equity market stress (NAV decline, GAAP loss, weakened yields), but emphasized effective downside mitigation through active trading, a strategic shift into mezzanine debt, realized gains from redemptions and calls, substantial credit hedges (~$175M, ~90% of NAV), portfolio expansion and liquidity, and tactical plans (potential unsecured debt issuance) to deploy into dislocations. The positives around risk management, realized gains, and positioning partially offset the material mark-to-market losses and ongoing market headwinds.Q4-2025 Updates
Positive Updates
Limited NAV Losses and Relative Outperformance
Ellington limited fund losses to approximately 9% of NAV in Q4, outperforming the overall peer set in a very challenging CLO equity market.
Strategic Shift into CLO Mezzanine Debt
Following conversion to a CLO closed-end fund, the firm increased allocation to CLO mezzanine debt: ~70% of CLO purchases during the 9-month buildout were mezzanine tranches. The proportion of debt in the CLO portfolio grew to just under 50% by year-end (up from roughly one-third at conversion).
Active Trading and Portfolio Expansion
High trading activity: 218 CLO trades over the 9-month period (47 unique trades in Q4 alone). Portfolio expanded nearly 50% to $370 million by calendar year-end, with $272 million of purchases and $63 million of sales (excluding redemptions) during that buildout.
Realized Gains and Defensive Positioning
Recorded positive realized gains in each CLO subsector for the quarter; several mezzanine positions purchased at discounts were redeemed at par, generating realized gains. The team exercised CLO call options and collapsed certain discounted CLOs to strengthen credit profile and liquidity.
Large Credit Hedge Allocation
Increased credit hedges to roughly $175 million of high-yield CDX bond equivalents by year-end, representing approximately 90% of NAV, reflecting significant downside protection.
Liquidity and Funding Optionality
Cash and cash equivalents totaled $24.3 million at December 31. Management is exploring issuance of long-term unsecured debt to add dry powder and optionality to deploy into dislocations.
Resilient CLO Mezzanine Performance
CLO mezzanine debt held up materially better than equity in Q4: net interest income and trading gains plus deal calls on discount positions offset most mark-to-market write-downs on mezzanine holdings.
Early 2026 Outperformance and Continued Mezzanine Focus
EARN outperformed its peer set in January with an NAV of $5.04. In 2026, >75% of purchases have been mezzanine debt (especially deleveraging BB tranches), reflecting continued defensive and opportunistic positioning.
Favorable Runway for Liability Resets
More than 40% of U.S. CLO portfolio deals are scheduled to exit non-call periods before year-end, creating potential for liability refinancing/resets that could mitigate coupon spread compression if market conditions permit.
Negative Updates
GAAP Net Loss and NAV Decline
Reported GAAP net loss of $0.56 per share for Q4. NAV-based total return for the quarter was negative 9.1% and the fund incurred a net quarterly loss driven by significant mark-to-market losses on CLO equity.
CLO Equity Market Stress and Market Returns
CLO equity performance was severely challenged: Nomura Research estimated median CLO equity return for the quarter at -9% and -14% for the full year 2025; Q4 described as the most challenging since mid-2022/COVID.
Decline in CLO Portfolio Yield and Net Interest Income
Weighted average GAAP yield on the CLO portfolio fell to 13.7% from 15.5% the prior quarter (a decline of 1.8 percentage points, or ~11.6% relative). Net interest income declined by $0.02 sequentially to $0.21 per share (approximately -8.7% sequential).
Credit Hedges Dragging Near-Term Results
Credit hedges, while protective, were a drag on Q4 results because broader credit and equity markets performed strongly during parts of the period; management estimates hedge drag roughly 1%–2% of fund NAV per annum on a run-rate basis (varies with market levels).
Pressure from Credit Dispersion and Coupon Spread Compression
Elevated credit dispersion and ongoing coupon spread compression pressured leveraged loan prices and reduced excess interest across most CLOs, lowering projected cash flows and mark-to-market valuations—key drivers of the NAV decline.
Weakness Concentrated in Lower-Quality Loans
Lower-rated CCC loans experienced significant pressure from CLO reset/liquidation activity and rising defaults, contributing to the underperformance of CLO equity relative to mezzanine debt.
Reduced European Exposure and Underperformance
European CLO investments declined to 12% of holdings from 14% as loans in Europe underperformed their U.S. counterparts; overall CLO portfolio size showed a modest sequential decline during the quarter.
New-Issue Equity Pricing Unattractive
Management largely avoided new-issue CLO equity because pricing was unattractive; weakness was more pronounced in new-issue equity vs. secondary market, limiting fresh equity deployment opportunities.
Company Guidance
Management's guidance was to rebuild net investment income and NAV by redeploying capital into defensive CLO mezzanine debt (about 70% of post‑conversion purchases and >75% of 2026 purchases to date) while selectively adding secondary CLO equity, maintaining large credit hedges (≈$175M of high‑yield CDX equivalents, ~90% of NAV, with an estimated drag of ~1–2% of NAV p.a.), and potentially issuing long‑term unsecured debt to add dry powder; they noted the CLO portfolio expanded nearly 50% to ~$370M by year‑end after 218 trades in nine months ($272M purchases, $63M sales), including 47 trades in Q4 (Q4 purchases $66M: 60% debt/40% equity; Q4 sales $19M), the proportion of debt in the CLO portfolio rose to just under 50% from ~33% at conversion, CLO equity represented 52% of holdings (European CLOs 12%), weighted average GAAP yield was 13.7% (down from 15.5%), Q4 GAAP net loss was $0.56/share, NAV was $5.19 at 12/31 (down to $5.04 at 1/31) with a Q4 NAV total return of −9.1%, cash was $24.3M, weighted average loan maturity 4.3 years, and >40% of U.S. CLOs are scheduled to exit non‑call before year‑end 2026.Ellington Residential Mortgage Financial Statement Overview
Summary
Mixed fundamentals: income statement profitability is volatile despite improved EBIT margin in 2024 (Income Statement score 48), balance sheet is more stable with improving equity and zero debt in 2024 (Balance Sheet score 60), but cash generation is weak with negative free cash flow and erratic operating cash flow (Cash Flow score 42).Income Statement
Ellington Residential Mortgage experiences inconsistent revenue trends, with a notable negative revenue in 2023 but a strong recovery in 2024. The gross profit margin remains steady at 100% in 2024 due to the nature of revenue and cost structure. However, net profit margins have fluctuated significantly, reflecting operational volatility. EBIT margins improved in 2024, highlighting operational efficiency gains, but overall profitability remains inconsistent.48
Neutral
Balance Sheet
The company's balance sheet shows a positive equity position, with stockholders' equity increasing over the years. The absence of total debt in 2024 improves the debt-to-equity ratio, enhancing financial stability. However, the equity ratio indicates moderate leverage, suggesting some risk if asset values fluctuate. Overall, the balance sheet reflects a moderate risk profile with a positive trend towards reducing leverage.60
Neutral
Cash Flow
Ellington Residential Mortgage has shown erratic cash flow trends, with operating cash flow fluctuating and negative free cash flow in 2023 and 2024. The financing cash flow indicates significant outflows, raising concerns about sustainability. The absence of consistent positive free cash flow suggests challenges in generating sufficient cash from operations. The cash flow management needs improvement to ensure long-term financial health.42
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 35.60M | 50.67M | 55.35M | -10.25M | 2.17M | 35.90M |
| Gross Profit | 4.70M | 15.88M | 10.09M | -25.07M | -557.00K | 25.94M |
| EBITDA | -5.04M | 7.10M | 4.56M | -30.20M | -6.31M | 20.11M |
| Net Income | -5.25M | 6.59M | 4.56M | -30.20M | -6.31M | 20.11M |
Balance Sheet | ||||||
| Total Assets | 783.56M | 824.09M | 945.69M | 1.05B | 1.60B | 1.19B |
| Cash, Cash Equivalents and Short-Term Investments | 17.38M | 31.84M | 38.53M | 34.82M | 69.03M | 58.17M |
| Total Debt | 517.54M | 562.97M | 729.54M | 842.46M | 1.06B | 1.02B |
| Total Liabilities | 555.06M | 630.37M | 809.45M | 941.22M | 1.44B | 1.03B |
| Stockholders Equity | 228.50M | 193.73M | 136.24M | 112.41M | 154.22M | 166.40M |
Cash Flow | ||||||
| Free Cash Flow | 19.53M | 9.11M | -10.02M | 22.42M | 27.88M | 24.37M |
| Operating Cash Flow | 19.53M | 9.11M | -10.02M | 22.42M | 27.88M | 24.37M |
| Investing Cash Flow | 48.66M | 116.45M | 85.72M | 110.55M | -15.23M | 304.06M |
| Financing Cash Flow | -73.25M | -132.25M | -71.98M | -167.18M | -1.79M | -305.61M |
Ellington Residential Mortgage Technical Analysis
Negative
4.37
Price Trends
5.09
Negative
5.03
Negative
5.06
Negative
Market Momentum
-0.18
Positive
26.83
Positive
8.74
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EARN, the sentiment is Negative. The current price of 4.37 is below the 20-day moving average (MA) of 4.79, below the 50-day MA of 5.09, and below the 200-day MA of 5.06, indicating a bearish trend. The MACD of -0.18 indicates Positive momentum. The RSI at 26.83 is Positive, neither overbought nor oversold. The STOCH value of 8.74 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EARN.
Ellington Residential Mortgage Risk Analysis
Ellington Residential Mortgage disclosed 108 risk factors in its most recent earnings report. Ellington Residential Mortgage reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ellington Residential Mortgage Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
62 Neutral | $257.94M | 4.69 | 35.45% | 5.39% | ― | ― | |
60 Neutral | ― | -13.70 | -6.59% | 17.91% | 630.98% | 234.98% | |
59 Neutral | $312.12M | 10.64 | 5.42% | 16.61% | -3.09% | 200.66% | |
55 Neutral | $264.58M | 17.24 | 0.03% | 12.83% | 90.34% | -44.25% | |
52 Neutral | $214.20M | 5.35 | 14.02% | 17.28% | 206.13% | 298.86% |
* Financial Sector Average
EARN
Ellington Residential Mortgage
4.37
-0.47
-9.79%
SSSS
SuRo Capital
10.16
4.59
82.27%
PNNT
Pennantpark Investment
4.78
-1.29
-21.23%
SCM
Stellus Capital
9.14
-3.48
-27.56%
TPVG
TriplePoint Venture Growth
5.26
-1.10
-17.30%
NXDT
NexPoint Diversified Real Estate Trust
4.66
1.32
39.44%
Ellington Residential Mortgage Corporate Events
Business Operations and StrategyDividends
Ellington Residential Mortgage Declares Monthly Common Dividend
Positive
Jan 9, 2026
On January 8, 2026, Ellington Credit Company announced that its Board of Trustees had declared a monthly common dividend of $0.08 per share, payable on February 27, 2026, to shareholders of record as of January 30, 2026. The dividend declaration underscores the fund’s continued focus on delivering current income to investors from its portfolio of corporate CLO investments, and signals ongoing confidence by the board in the fund’s cash-generation ability and income-distribution strategy.
The most recent analyst rating on (EARN) stock is a Buy with a $6.00 price target. To see the full list of analyst forecasts on Ellington Residential Mortgage stock, see the EARN Stock Forecast page.
Dividends
Ellington Residential Mortgage Declares Monthly Dividend
Positive
Dec 4, 2025
On December 4, 2025, Ellington Credit Company announced that its Board of Trustees declared a monthly dividend of $0.08 per share, which will be payable on January 30, 2026, to shareholders of record as of December 31, 2025. This decision reflects the company’s ongoing commitment to providing attractive yields and risk-adjusted returns, leveraging its expertise in portfolio management and credit analysis.
The most recent analyst rating on (EARN) stock is a Buy with a $6.50 price target. To see the full list of analyst forecasts on Ellington Residential Mortgage stock, see the EARN Stock Forecast page.
Business Operations and StrategyDividendsFinancial Disclosures
Ellington Residential Mortgage Reports Strong Q2 2025 Results
Positive
Nov 19, 2025
Ellington Credit Company announced its financial results for the second fiscal quarter ending September 30, 2025. The company reported a net asset value per share of $5.99, with a GAAP net income of $4.3 million and net investment income of $8.5 million. The company’s CLO portfolio grew to $379.6 million, with significant trading activity that included 92 trades. The management highlighted the full dividend coverage achieved from net investment income and emphasized their strategic portfolio repositioning to enhance yields and protect against downside risks. The balanced mix of mezzanine and equity tranches, along with a credit hedging portfolio, positions the company for potential outperformance as market conditions evolve.
The most recent analyst rating on (EARN) stock is a Hold with a $5.25 price target. To see the full list of analyst forecasts on Ellington Residential Mortgage stock, see the EARN Stock Forecast page.
Dividends
Ellington Residential Mortgage Declares November Dividend
Positive
Nov 10, 2025
On November 10, 2025, Ellington Credit Company announced that its Board of Trustees declared a monthly dividend of $0.08 per share, which will be payable on December 31, 2025, to shareholders of record as of November 28, 2025. This decision reflects the company’s ongoing commitment to providing returns to its investors, leveraging its expertise in managing collateralized loan obligations, and maintaining its position in the financial market.
The most recent analyst rating on (EARN) stock is a Hold with a $5.25 price target. To see the full list of analyst forecasts on Ellington Residential Mortgage stock, see the EARN Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.