Another Quarter, no Dividend Coverage at CapitalSource

No stranger to the blog, CapitalSource (CSE) earns some grouching over its failure to explain why it continues to declare a dividend that is 117% higher than its core earnings. John Delaney blithely explained the modest recent gap thusly:

Second, I was actually very pleased with the adjusted earnings performance of the business at $0.51 per share for the quarter, particularly since we recognized $0.09 in quarterly adjusted earnings loss, related to the reduction of our agency portfolio by over $600 million. We have continued to reduce our agency portfolio, and today it stands at about $1.6 billion, down from its peak of about $4 billion.

The reason for this reduction is simple. We didn't need as many agencies for recompliance, and we elected to reduce the portfolio, not because we had to, but simply because we could, and it resulted in a dramatic reduction in any funding risk against this portfolio.

More like, we don't like agencies, we don't know to manage them, we just have to have them. Just ignore them and focus on our better lines of business.