Blackstone Mortgage TrustNYSE: BXMT

This year, the saying "sell in May and go away" could be particularly relevant for real estate investment trusts (REITs) that are most impacted by the two main factors affecting the sector.

Blackstone Mortgage Trust's stock dropped by 4.6% following a net loss in Q1 caused by issues with office loans. An uptick in the anticipated credit loss reserve impacted the company's ability to cover dividends, prompting worries about the dividend's longevity. Market apprehension over the trust's office loan portfolio's creditworthiness is evident in the 29% discount to book value.

Blackstone Mortgage (BXMT) has a strong track record of surpassing earnings expectations and currently has the ideal mix of factors to potentially exceed expectations in its upcoming quarterly report.

Blackstone Mortgage Trust, Inc. has a diversified asset base across different regions and sectors, but we anticipate potential negative impacts from duration and convexity later this year. While short-term U.S. inflation is strong, long-term trends indicate that yields may decrease by late 2024. Additionally, similar challenges are faced in BXMT's other operating regions. The company may face constraints on capital due to ongoing economic risks, which could limit its profit potential.

Blackstone Mortgage Trust is among the leading mortgage REITs globally, holding a varied range of commercial loans in different asset categories. BXMT is currently undervalued compared to its book value, presenting an opportunity for investors who are confident in the growth of the commercial real estate industry. In 2023, BXMT's dividend coverage stood at 123%, ensuring sufficient protection against persistent industry challenges such as the office market downturn.

TCPC, BXMT, and CHK were placed on the Zacks Rank #5 (Strong Sell) List on April 10, 2023.

Muddy Waters Capital founder Carson Block says the firm is growing even more convinced about the bet against Blackstone Mortgage Trust Inc. "We feel really good that a dividend cut will be coming in the second half of the year," he tells Bloomberg's Sonali Basak.

Blackstone Mortgage Trust comfortably covered its dividend pay-out with distributable earnings in 4Q-23. BXMT stock is selling at a significant discount to book value, providing a high margin of dividend safety. Despite concerns over exposure to the U.S. office category, the trust's 12% yield is expected to remain safe.

Blackstone Mortgage Trust beat earnings estimates for Q4, but showed weakness in its loan portfolio, with a decline in performing loans and a drop in book value. The REIT's CECL reserve increased significantly in Q4'23, indicating higher expected credit losses for its office loan portfolio. The distribution coverage ratio dropped relative to Q3'24, raising concerns for dividend investors.