EFC

Ellington Financial is an externally managed, opportunistic mortgage REIT (Investment Portfolio + Longbridge reverse-mortgage segments) whose stock lives and dies by book value and dividend coverage. At $13.47 against $1.83B equity on 125M shares (~$14.6 book), EFC trades near/just below book — the usual mREIT floor — and the 10-K's performance graph shows it compounding to $167 vs the FTSE NAREIT Mortgage REIT index's $114 over five years, so management has out-invested the peer group. FY2025 net income of $119M was essentially flat (+0.8%) and the 11.3x P/E on $1.19 diluted EPS is not demanding for the sector. That's the bull case: a diversified credit book at a small discount to book with a double-digit distribution.

The problem is quality beneath the price. Diluted EPS fell 12.5% even as net income held flat, because shares outstanding jumped 37.5% — equity grew only 16.8% against that share count, so per-share book value actually eroded, meaning capital was raised at or below book and existing holders were diluted. ROE is just 6.5%, below a reasonable cost of equity for a 9.5x-levered balance sheet, and retained earnings sit at -$413M. Dividends paid ($184M) exceed full-year net income ($119M): the ~11% yield is not covered by GAAP earnings and is being funded partly by return of capital.