Blackstone Mortgage Trust: Dividend Cut Not Enough to Earn it Back

Blackstone Mortgage Trust lowered its dividend by 24% in Q3 2024, yet still fails to fully earn its dividend due to pressure on its portfolio and net interest. The company's performance continues to be a concern for investors.

Blackstone Mortgage Trust (BXMT) has faced significant challenges in recent quarters, with the company continuing to struggle with its dividend and portfolio performance. In the third quarter of 2024, BXMT lowered its dividend by 24%, yet it still failed to fully earn its dividend due to pressure on its portfolio and net interest income. This situation has raised concerns among investors about the company's financial health and future prospects.

The company's latest earnings report for the third quarter of 2025 indicates that while there have been some improvements in portfolio turnover and credit composition, the challenges remain substantial. The report shows that BXMT achieved $1.8 billion in repayments and $1.6 billion in new investments, marking the highest level of quarterly originations in over two years. However, despite these positive developments, the company's portfolio is still under pressure, with a significant portion of its assets being high-risk loans. Additionally, the company's net interest income has been declining, further exacerbating the pressure on its dividend.

The company's dividend coverage ratio, which measures the ability to pay dividends, has been improving but remains below 1.0. In the second quarter of 2025, the company's dividend coverage ratio was 0.96X, indicating that it still did not fully support its current dividend. This situation has led some analysts to suggest that BXMT may have to cut its dividend again if its distributable earnings performance does not improve.

BXMT's valuation has also been affected by these challenges. The company has lost around 30% of its book value over the past three years, mainly due to loan losses and a shrinking office portfolio. As a result, BXMT is currently trading at a 7% discount to net asset value compared to a 2% discount for Ladder Capital and a 16% premium for Starwood Property. While some analysts believe that BXMT could revalue to book value if it stops the bleeding in its office portfolio and returns to full dividend coverage, the company's continued dividend coverage challenges and declining interest income may lead to a larger discount to net asset value.

Investors should closely monitor BXMT's future earnings reports and dividend coverage ratios to assess the company's ability to support its dividend and navigate its portfolio challenges. The company's strategic focus on minimizing credit risk, optimizing its balance sheet, and leveraging its global origination platform may help improve its performance, but significant progress will be needed to fully address the concerns of investors.

References:
[1] https://www.tipranks.com/stocks/bxmt/earnings
[2] https://seekingalpha.com/article/4816687-blackstone-mortgage-trust-stay-on-the-sidelines