New York Mortgage Trust, Inc.: Does This 13% Yielder Deserve an Upgrade?
A Not-So-Perfect Double-Digit Yielder
If you were to ask whether the dividend was safe at New York Mortgage Trust, Inc. (NASDAQ:NYMT) last year, the answer would be “no.”
The reason is simple. Last year, the company declared total dividends of $0.80 per share. Meanwhile, it earned a basic net income of $79.2 million, or $0.62 per share. Comprehensive income came in at $51.5 million, or $0.40 per share. (Source: “Form 10K,” New York Mortgage Trust, Inc., last accessed June 24, 2019.)
In other words, whether you look at the company’s basic net income or comprehensive income in 2018, the amount fell short of the its total dividends declared during the year.
And it’s not like NYMT stock had an impeccable dividend history. In September 2015, the company reduced its quarterly dividend rate from $0.27 per share to $0.24 per share, marking an 11.1% cut. Then, in March 2017, New York Mortgage Trust slashed its quarterly payout by another 16.7% to $0.20 per share. (Source: “Dividend History,” New York Mortgage Trust, Inc., last accessed June 24, 2019.)
In general, conservative income investors aren’t exactly fans of stocks that have cut their dividends before. This is because, if a company’s management has reduced the dividend once, they probably wouldn’t be shy about doing it again when the going gets tough.
That’s one of the reasons why NYMT stock hasn’t been a hot commodity. Over the past five years, it has tumbled more than 20%.
Still, the downturn in the company’s share price has made its yield very attractive, even after two reductions to the cash dividend rate. Trading at $6.17 per share, New York Mortgage Trust stock provides a jaw-dropping yield of 13%.
Will Things Get Better at New York Mortgage Trust, Inc.?
Now, given that most companies trading in today’s stock market don’t even yield a third as much as NYMT stock does, its sky-high yield seems too good to be true.
And based on what we just looked at (a lack of dividend coverage in 2018 and a less-than-stellar dividend history), the company seems to be just another ultra-high yielder that risk-averse investors typically remove from their watchlists.
But before you do that too, here’s the latest information regarding New York Mortgage Trust: in the first quarter of 2019, the company earned a basic net income of $38.2 million, or $0.22 per share. Its comprehensive net income totaled $51.3 million, or $0.29 per share. Now that’s quite interesting, because whichever number you pick, it was in excess of the company’s 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.)
Given that we are in a low-yield environment at the moment in terms of both interest rates and dividend yield, a double-digit yield like what’s being offered by NYMT stock definitely looks shaky. This also means that being able to outearn its dividend—which is what New York Mortgage Trust just did—is quite an impressive feat for a double-digit yielder.
At the end of the day, keep in mind that New York Mortgage Trust has chosen to be regulated as a real estate investment trust. That means it is legally required to distribute at least 90% of its profits to shareholders through regular dividend payments. Therefore, if the company can continue outearning its dividends, it could bode well for its dividend investors.
New York Mortgage Trust, Inc. is ultimately not a perfect dividend stock, but its recent developments deserve income investors’ attention.