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Redwood Trust, Inc. Declares a Fourth Quarter Regular Dividend and a Special Dividend Payable in the Fourth Quarter of 2004

Monday, November 15, 2004

MILL VALLEY, Calif.--(BUSINESS WIRE)--Nov. 15, 2004--Redwood Trust, Inc. (NYSE:RWT), a financial institution that invests in, credit-enhances, and securitizes residential and commercial real estate loans and securities, today announced the declaration of a regular dividend and a special dividend for the fourth quarter of 2004.

Regular Dividend

Redwood's Board of Directors authorized the payment of a fourth quarter regular cash dividend of $0.67 per share, payable on January 21, 2005 to stockholders of record on December 31, 2004.

"For 2005, our Board of Directors has indicated that it intends to authorize an increase in Redwood's regular dividend rate to $0.70 per share per quarter," said George Bull, Redwood's Chairman and CEO. "Sustaining our regular dividend rate over time is our primary financial goal."

Special Dividend

Redwood's Board of Directors also authorized payment of a special cash dividend of $5.50 per share, payable on December 10, 2004 to stockholders of record on November 30, 2004.

Bull commented, "As I said last year, management is proud to deliver a special dividend to stockholders. The continuation of an exceptional housing market has made a special dividend of this size possible. While the payment of a special dividend could recur, it should not be relied upon going forward. I am saying this once again for a reason. It is important to understand that Redwood's regular dividend rate is meant to give an indication to stockholders of the level of dividend distribution that management and the Board believe Redwood can reasonably support in the future. The special dividend that we are paying to our stockholders at this time reflects better than anticipated returns on our investments over the last few years." Bull concluded, "I believe all businesses are cyclical, including ours, and this special dividend reflects the benefits of a very strong cycle."

Harold Zagunis, Redwood's CFO, said, "The November 2004 special dividend represents the distribution of a portion of the REIT taxable income we earned in 2004. As we did in prior years, we also intend to defer until 2005 the distribution of a portion of this year's REIT taxable income. We currently expect that the amount we will defer will equal two to three quarters of dividends at our 2005 regular dividend rate. We also intend to retain approximately 10% of the ordinary REIT taxable income we earned during 2004 and to retain income we earned at our taxable subsidiaries. Retaining earnings helps to build book value per share, and should help to support long-term earnings and dividend growth. We currently expect that our November 2004 special dividend will be the only special dividend we will need to declare in order to meet our REIT distribution requirements for 2004 income."

"We expect to designate a portion of our dividends declared during 2004 as a distribution of long-term capital gain income earned by Redwood during 2004," Zagunis continued. "Many of our tax-paying stockholders should benefit to the extent that they can take advantage of the lower tax rate on long-term capital gain distributions. We will distribute information on the composition of our 2004 dividends prior to January 31, 2005."

Form 10-Q Filing

Redwood filed its Form 10-Q for the third quarter of 2004 on November 15, 2004. The auditors completed their review of the quarter, and there were no changes to third quarter results as released last week.

For more information about Redwood Trust, Inc., please visit

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Certain matters discussed in this news release may constitute forward-looking statements within the meaning of the federal securities laws that inherently include certain risks and uncertainties. Among the terms indicating forward-looking statements are words such as "may," "should," "believe," "intend" or "expect." Actual results and the timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, among other things, changes in interest rates on our mortgage assets and borrowings, changes in prepayment rates on our mortgage assets, general economic conditions, particularly as they affect the price of mortgage assets and the credit status of borrowers, and the level of liquidity in the capital markets, as it affects our ability to finance our mortgage asset portfolio, and other risk factors outlined in the Company's 2003 Annual Report on Form 10-K and September 2004 Prospectus Supplement (available on the Company's Web site or by request to the Contacts listed above). Other factors not presently identified may also cause actual results to differ. No one should assume that results or trends projected in or contemplated by the forward-looking statements included above will prove to be accurate in the future. We will revise our outlook from time to time and frequently will not disclose such revisions publicly.

    CONTACT: Redwood Trust, Inc.
             Harold Zagunis, 415-389-7373
             Nicole Klock, 415-389-7373

    SOURCE: Redwood Trust, Inc.

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