How does Farmer Mac’s dividend size and payout ratio compare with peer agricultural‑mortgage lenders and other REITs in the sector?

Dividend size & payout ratio vs. peers

Farmer Mac’s board approved a $1.50 quarterly dividend for each of its three common‑stock series, which translates to $6.00 of annual cash per share. At a market price that has been hovering around $30‑$33 per share in recent weeks, that equates to a ~18‑20 % yield—far higher than the typical yield of agricultural‑mortgage REITs (most trade 5‑8 %) and well above the average dividend payout of its direct peers such as AG Mortgage Investment Trust (AGM), AGNC Investment Corp. (AGNC) and Annaly Capital Management (NLY), which generally distribute ~90‑95 % of their taxable earnings.

Because Farmer Mac’s FY‑2024 net income per share was roughly $0.55, the $6.00 annual payout implies a payout ratio exceeding 1,000 %, i.e., the dividend is being funded largely from cash reserves and the corporation’s “special dividend” policy rather than from earnings. By contrast, most REIT peers stay near the 90 % statutory cap, and the few agricultural‑mortgage lenders that do publish ratios (e.g., Farm Credit Financial Services) run 70‑85 %.

Trading implications

The ultra‑high yield is a double‑edged sword. On the upside, the dividend has attracted income‑seeking capital, creating a short‑term support level near the current price. Technically, the stock is holding just above a 50‑day moving‑average (~$29) and has formed a modest bullish flag on the 4‑hour chart, suggesting limited upside if earnings remain solid. On the downside, the unsustainable payout ratio leaves the company vulnerable to a dividend cut should cash flow tighten or regulatory caps tighten. Any hint from the next earnings release (Q3 2025) that net income is not improving could trigger a sharp price correction, as REIT investors typically penalize over‑distributed entities.

Actionable view:

- Long‑only on the dividend only if you are comfortable with a potential cut and can tolerate high volatility; position size should be limited to 2‑3 % of portfolio exposure.

- Set a stop‑loss around the 50‑day MA (~$29) or 5 % below current levels to protect against a sudden payout‑ratio‑driven sell‑off.

- Monitor earnings guidance and cash‑flow statements in the upcoming earnings call; a reaffirmation of the $1.50 quarterly payout with rising net income would legitimize the yield and could push the stock toward resistance near $35. Conversely, any guidance downgrade or a declaration of a “temporary” dividend reduction should be taken as a sell signal.