UPDATE 1-FBR sees dividend cuts at 2 REITs, cuts price target

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Dec 5 (Reuters) - Friedman Billings Ramsey cut its price target on Anthracite Capital Inc (AHR.N) and NorthStar Realty Finance Corp (NRF.N) and said the two real estate investment trusts (REIT) are likely to reduce their dividend levels.

NorthStar could reshape its dividend payout next year to preserve financial flexibility, while Anthracite could cut its current dividend by 50 percent in 2009, analyst Merrill Ross wrote in a research note.

A revised dividend policy could mean Northstar reducing its current dividend of 36 cents a share by 50 percent, Ross noted.

"The retained cash flow may allow the company to take advantage of market opportunities to reduce debt and create value for shareholders," he said.

Ross cut the company's price target by 38 percent to $5.

At Anthracite, a reduced dividend would help in retaining about half of its quarterly cash flows and to pay any catch-up dividend required to maintain REIT status in a special distribution, Ross said.

"The retention of cash flows should make a material difference in financial flexibility as Anthracite Capital negotiates its maturing credit facilities," the analyst said.

Anthracite currently pays out a quarterly dividend of 31 cents a share.

Ross halved the company's price target to $3.50.

However, he maintained his "market perform" rating on both the stocks.

Shares of NorthStar closed at $3.42 Thursday on the New York Stock Exchange, while those of Anthracite closed at $2.79. (Reporting by Anurag Kotoky in Bangalore; Editing by Jarshad Kakkrakandy)