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Redwood Trust, Inc. Declares a Fourth Quarter Regular Dividend and a Special Dividend

Monday, November 13, 2006


Redwood Trust, Inc. (NYSE:RWT) today announced the declaration of a regular quarterly dividend and a special dividend.

Redwood's Board of Directors authorized the payment of a fourth quarter regular cash dividend of $0.70 per share, payable on January 22, 2007 to stockholders of record at the close of business on December 29, 2006.

Redwood's Board of Directors also authorized payment of a special cash dividend of $3.00 per share, payable on December 8, 2006 to stockholders of record on November 27, 2006.

George Bull, Chairman and CEO of Redwood, said: "I am very proud of Redwood's performance in 2006, a year of uncertainty and rapidly changing conditions in the real estate markets. Our real estate assets are performing well, with low delinquency rates and negligible credit losses. As a result, we declared total dividends for 2006 of $5.80 per share."

"Our Board has indicated that it intends to raise Redwood's regular dividend to a rate of $0.75 per share per quarter during 2007," continued Bull.

"We continue to manage Redwood with the goal of delivering attractive and rising earnings per share over the long-term," said Bull. "To this end, we believe we are well positioned in the shorter-term to meet the challenges of the residential credit cycle and in the longer-term to grow by maintaining an efficient balance sheet, productive operations, and other competitive advantages in our markets."

Redwood's 2006 special dividend represents the distribution of a portion of the REIT taxable income we earned during 2006. As we did in prior years, Redwood also intends to defer until 2007 the distribution of a portion of REIT taxable income earned in 2006. We currently expect that the amount we will defer will equal two to three quarters of dividends at our regular dividend rate. Furthermore, we intend to retain approximately 10% of the ordinary REIT taxable income we earn during 2006, and we also intend to retain the income we earned at our taxable subsidiaries. Retaining earnings helps to build book value per share, which should help support long-term growth in earnings and dividends per share. We currently expect that the $3.00 per share special dividend will be the only special dividend we will need to declare in order to meet our REIT dividend distribution requirements with respect to 2006 income. We expect the tax character of Redwood's 2006 dividends will be primarily ordinary income, with lesser amounts of capital gains income than the last few years. We will distribute information on the tax composition of our 2006 dividends prior to January 31, 2007.

Redwood Trust, Inc. invests in and manages residential and commercial real estate assets. For tax purposes, we are structured as a real estate investment trust (REIT).

For more information about Redwood Trust, Inc., please visit our website (

CAUTIONARY STATEMENT: This press release contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical in nature, including the words "anticipated," "estimated," "should," "expect," "believe," "intend," and similar expressions, are intended to identify forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including, among other things, those described in our 2005 Annual Report on Form 10-K under Item 1A "Risk Factors." Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected are detailed from time to time in reports filed by us with the Securities and Exchange Commission, including Forms 10-K, 10-Q, and 8-K. Important factors that may impact our actual results include changes in interest rates and market values; changes in prepayment rates; general economic conditions, particularly as they affect the price of earning assets and the credit status of borrowers; the level of liquidity in the capital markets as it affects our ability to finance our real estate asset portfolio; and other factors not presently identified. In light of these risks, uncertainties, and assumptions, the forward-looking events mentioned in, discussed in, or incorporated by reference into this press release might not occur. Accordingly, our actual results may differ from our current expectations, estimates, and projections. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Source: Redwood Trust, Inc.

Contact: Redwood Trust, Inc. Nicole Klock, 415-389-7373

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