WMC Stock is a Top High-Dividend Stock
Western Asset Mortgage Capital Corp (NYSE:WMC) stock features a high dividend yield of 11.8%. Is that enough to warrant an investment? Or is there more to this stock than meets the eye?
One sector that has not changed much with the dramatic shifts in technology is real estate. The business model is what it’s always been: purchase and own real estate assets in order to earn a steady source of revenue via tenants. Investors also benefit through the appreciation in value of the land and property.
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That said, it is quite difficult to participate in the real estate sector because of the high barriers of entry. However, there is a means to invest without required a huge amount of capital: real estate investment trusts (REITs) like WMC stock. These companies don’t pay the government taxes in exchange for putting 90% of their income towards their dividends and at least 75% of every asset being related to real estate.
Below is more information on why WMC stock may be worth consideration as a potential investment.
Earn a Markting-Beating Income Return
As mentioned earlier, WMC stock pays a high dividend yield of 11.8%. It is usually distributed in January, April, July, and October.
The market-beating returns are reflected in the stock’s double-digit yield when compared to the average dividend yield for the industry (3.7%) and to the benchmark S&P 500 Index (1.9%). Neither of these yields are anything to write home about.
Even though its current dividend being paid is already much higher than the comparisons above, WMC stock could have more opportunities to grow in the coming years. Just look at the company’s growing expected earnings per share (EPS) in the table below:
|Year||Type of Earnings||Annual EPS|
Over the next three years, EPS is expected to increase 17%. One reason for the bullish outlook is the company’s cash flow being protected from inflation. As a result, a higher amount of income is earned per square foot as time goes on, and without the need to renovate or otherwise improve the real estate. Also, contract renewals are done at a higher rate than the previous deals. These are all characteristics of owning real estate assets.
Great Business Operators
Numbers don’t lie: companies with margins their industry averages tend to have the best leaders and retain the most money. And more money left after operating costs means more to reinvest back into the business and share with investors.
Like its yield, WMC’s margins sit at a higher rate than the industry average. For example, its profit margin is 28%, compared to 23% for the peer group; that’s five percent more hitting the bottom line. I know this may not sound like something to get excited about, but with a portfolio value north of $1.0 billion, every little bit counts.
WMC’s senior managers have their personal wealth in shares as well, showing their faith in the business (if not their insider knowledge) and aligns their personal interests with those of traditional shareholders.
Final Thoughts About WMC Stock
Interest rates in the U.S. are at historic lows, so there aren’t many returns being generated from traditional investments such as savings accounts. But an investment in WMC stock currently means no concerns about receiving a low yield. For now, buying and holding is a viable options, but it’s still recommended that you do your research first.