Granite Point Mortgage Trust: Can Dividends Hold Up in a Rising Rate World?

The commercial real estate sector has faced significant headwinds as rising interest rates and economic uncertainty test the resilience of mortgage REITs. Among them, Granite Point Mortgage Trust (NYSE: GPMT) has emerged as a case study in balancing dividend sustainability with aggressive risk management. With its dividend slashed to $0.05 per share quarterly in 2025—down from $0.25 just three years prior—the question is: Can Granite Point maintain payouts without further erosion, and what does its strategy reveal about its long-term prospects?

Floating-Rate Portfolio as a Shield Against Rate Risks

Granite Point's primary defense against rising rates lies in its 98% floating-rate loan portfolio. This structure allows the company to reset interest income as rates climb, mitigating the risk of shrinking margins. As of March 2025, the weighted average loan yield stood at 6.8%, a reflection of the higher rate environment. The portfolio's conservative underwriting—64.5% loan-to-value (LTV) at origination—also buffers against property value declines.

The would show how its floating-rate exposure has insulated income relative to fixed-rate peers. This strategy has kept the company's leverage ratio at a manageable 2.2x, with no corporate debt maturities looming, providing flexibility in a volatile market.

Credit Risk Management: Cutting Losses Proactively

Granite Point's aggressive resolution of non-performing assets (NPAs) underscores its focus on capital preservation. In early 2025, it wrote off $230 million in high-risk loans, including a Miami Beach office property ($7.9 million write-off) and a Boston office loan ($16.6 million). By June, it had further resolved a Minneapolis hotel ($15.4 million) and a Baton Rouge mixed-use property ($20.8 million). These actions reduced risk-rated 5 loans (the highest risk category) to minimal levels, supported by a 8.8% CECL reserve—$180 million—against total loans.

While these write-offs contributed to a Q1 2025 GAAP net loss of $10.6 million, they reflect prudent risk-taking. The would illustrate how proactive deleveraging has stabilized its balance sheet.

Dividend Strategy: Pragmatic Cuts for Sustainability

The dividend reduction from $0.20 per share in 2022 to $0.05 in 2025 is stark, but it aligns with Granite Point's liquidity-first approach. The company has prioritized maintaining a robust cash buffer—$70 million as of June 2025—and repurchasing shares to accrete book value. Year-to-date, it bought back 1.7 million shares, boosting book value by $0.10 per share.

The would show how buybacks have increasingly offset dividend cuts. With a common stock yield of 8.47% and a total shareholder yield (dividends + buybacks) of 18.1%, the stock offers compelling returns—but at a risk premium.

The Investment Case: High Yield, High Risk

Granite Point's strategy has merits. Its floating-rate portfolio and strong liquidity position it to withstand further rate hikes, while its disciplined credit management reduces downside risks. The buyback program also signals confidence in its intrinsic value over the stock's market price.

However, challenges remain. The commercial real estate sector faces overleveraged borrowers, vacancies, and potential defaults, particularly in office and retail properties. Granite Point's focus on senior loans mitigates this exposure, but its write-offs highlight the sector's fragility. Analysts have downgraded the stock due to concerns over dividend sustainability, and the $0.05 dividend—though maintained through Q2 2025—could face further pressure if NPA resolutions escalate.

Verdict: A Speculative Play for Aggressive Investors

Granite Point is not for the faint-hearted. Its high yield and aggressive risk management make it a compelling option for investors seeking outsized returns in a low-yield environment. However, its success hinges on the broader commercial real estate recovery and the company's ability to navigate a still-fragile market.

For now, the dividend appears stable, but investors should monitor two key metrics: the trajectory of non-performing loans and the pace of share repurchases. A could reveal whether the stock is undervalued relative to its equity position.

In conclusion, Granite Point exemplifies the tightrope REITs walk in this environment—trading dividend cuts for capital safety. While the path is risky, the rewards for patient investors willing to stomach volatility could prove worthwhile.