Invesco Mortgage Capital Inc. (IVR) Cash Flow Statement

In 2025Q1, dividends paid of $28.0M exceeded AFFO of $19.8M, resulting in a payout ratio above 100%. This suggests that the dividend may not be fully covered by core earnings, a trend that warrants monitoring. In contrast, 2025Q4 showed a payout ratio of 53%, but the volatility in AFFO across quarters raises questions about the sustainability of the dividend.

The divergence between net income and FFO is pronounced, with FFO/NI ratios ranging from -1.74 to 17.64. This indicates that GAAP net income is heavily influenced by non-cash fair value changes on securities, which do not reflect the underlying cash-generating ability of the portfolio. Investors should focus on FFO as a more stable measure of operating performance.

For instance, in 2025Q2, OCF was $40.6M despite a net loss of $23.3M, indicating that cash flows are not directly tied to reported earnings. This may reflect the timing of interest receipts and payments on mortgage-backed securities, as well as changes in working capital. The lack of straight-line rent adjustments typical of equity REITs means these swings are likely driven by securities settlement activity.

The high leverage limits financial flexibility, and any market stress could force deleveraging at unfavorable prices. The reliance on external funding to sustain dividends, especially in quarters where AFFO is negative, may indicate that the dividend is not fully self-funding. Investors should monitor any equity issuance activity, as it could dilute existing shareholders.