New York Mortgage Trust, Inc.: This 12.8% Yield Deserves a Second Look
Can You Count on This 12.8% Yield?
In an era when the average S&P 500 company pays less than two percent, a yield of over 10% simply seems too good to be true.
But investors shouldn’t just ignore double-digit yielders completely. For those who are willing to take a bit more risk, some ultra-high-yielding stocks could provide oversized cash returns.
With that in mind, let’s check out New York Mortgage Trust, Inc. (NASDAQ:NYMT).
As its name suggests, New York Mortgage Trust is a mortgage real estate investment trust (REIT) headquartered in New York City. The company invests in residential mortgage loans, multifamily commercial mortgage-backed securities, and preferred equity and joint venture equity in multifamily properties.
At the same time, NYMT’s strategy allows it to make mezzanine loans to owners of multifamily properties.
As I mentioned earlier, the focus here is earning ultra-high dividends. Last month, New York Mortgage Trust paid a quarterly cash dividend of $0.20 per share. That’s an annualized amount of $0.80 per share. Since NYMT stock trades around $6.30 per share, the company’s latest dividend payment gives it a jaw-dropping annual yield of 12.8%.
New York Mortgage Trust, Inc. Isn’t a Perfect Dividend Stock
Like most double-digit yielders, New York Mortgage Trust is not a perfect dividend stock.
In particular, while its current dividend policy seems generous, it was the result of a dividend cut. Three years ago, New York Mortgage Trust was paying investors $0.24 per share each quarter. In March 2017, the company cut its quarterly payout to $0.20 per share, marking a 16.7% reduction. (Source: “Dividend History,” New York Mortgage Trust, Inc., last accessed May 8, 2019.)
NYMT’s dividend coverage was also not exactly stellar. In full-year 2018, the company earned a net income of $0.62 per share while paying $0.80 per share in dividends. (Source: “New York Mortgage Trust Reports Fourth Quarter 2018 Results,” New York Mortgage Trust, Inc., February 21, 2019.)
In other words, New York Mortgage Trust’s profit did not cover its payout last year.
Is a Turnaround on the Horizon?
Now, however, things seem to have improved. In the first quarter of 2019, New York Mortgage Trust’s net income totaled $0.22 per share, which provided more than enough coverage for its quarterly dividend payment of $0.20 per share. (Source: “New York Mortgage Trust Reports First Quarter 2019 Results,” New York Mortgage Trust, Inc., May 6, 2019.)
Obviously, one quarter of dividend coverage is not a good enough reason to put a “buy” rating on NYMT stock. In order for this stock to deserve a spot in a risk-averse income investor’s portfolio, the company needs to show the ability to outearn its dividends on a consistent basis.
Still, due to the improvements that the company made in its first quarter, I’d be willing to add New York Mortgage Trust, Inc. to my watch list.