Every investor wants their stocks to pay off – or they wouldn’t be in the markets. But finding the right investment, “the one” that will bring profits no matter what direction the markets as a whole take, can sometimes be difficult.
The two simplest courses of action an investor can take to ensure solid returns are based on common sense. The first is to buy low and sell high. That is, find a cheap stock with strong fundamentals and good growth prospects – and buy to take advantage of the growth potential. The second common sense move is to buy stocks that will pay you back. That is, buy dividend stocks.
So, let’s try to look at the two strategies. We used the TipRanks database to find details of several stocks that are priced below $ 10 per share and that offer high yield dividends above 8%. These aren’t big names that dominate the stock market, but they are companies that deserve a second look nonetheless.
Sachem Capital (SACH)
We’ll start with Sachem Capital, a real estate investment trust (REIT). These companies are well known as the dividend champions, due to an aspect of tax regulations that requires them to return a certain percentage of their profits and profits directly to shareholders. Dividends are a convenient method for such returns – and dividend investors can profit from REITs.
Sachem, based in Connecticut, specializes in first mortgage loans. The company’s portfolio is based on short-term secured non-bank loans to real estate investors, with the aim of financing acquisitions, renovations, building rehabilitations and developments in residential and commercial areas. The company’s activities are focused primarily in Connecticut, Massachusetts and New York, as well as Florida.
Sachem will release its 3Q21 numbers on November 17, but we can get an idea of where the company stands by looking at the Q2 and 1H results previously released. The company reported a record second quarter quarterly revenue of $ 6.46 million, up 56% from 2Q20. Earnings were 10 cents per share, EPS’s fifth consecutive quarter of 10 cents. Sachem had $ 106.7 million in liquid assets as of June 30 of this year, up 88% from December 31, 2021.
Ahead of the third quarter report, the company declared a current dividend of 12 cents per share. This is the tenth quarter in a row with dividend payouts at this level – and it marks more than three years of reliable dividend payouts. At the current payout, the dividend annualizes to 48 cents per common share, and gives a yield of 8.3%.
Aegis analyst Brian Hollenden covers this title and is optimistic about its potential. He writes: “SACH’s ability to take out an investment opportunity and fund a loan within days really gives the company a significant competitive advantage. In addition, being a public company and having access to a lower cost of capital also sets it apart from many of its competitors. In addition, management has worked in many credit cycles and is, in our opinion, relatively conservative. With over 12% lending capacity and access to debt and equity the costs of which continue to decline, we see SACH generating significant shareholder value over the long term. “
To this end, Hollenden evaluates SACH a purchase with a target price of $ 8. This figure suggests a margin of around 38% of gain over the coming year. (To look at Hollenden’s background, Click here)
Sachem hasn’t garnered much analyst attention, but those who have reviewed the stock agree with Hollenden’s assessment. Sachem has a unanimous Strong Buy analyst rating, based on 3 recent ratings. The average stock price target of $ 6.50 points to a 12% increase over the coming year. (See the analysis of SACH shares on TipRanks)
Manhattan Bridge Capital (READY)
Next, Manhattan Bridge Capital, a New York-based micro-capitalization loan company. The company focuses on short term, secured and hard money loans, and like Sachem above, Manhattan Bridge loans are used for first mortgages, typically by real estate developers. The typical collateral offered on loans is marketable stocks or real estate.
The company’s recent third quarter results showed $ 1.63 million in the lead, with EPS of 10 cents. On both measures, the trend in recent quarters has been downward. However, despite the slow decline in revenues and profits, Manhattan Bridge has maintained its dividend payments – and even increased them in recent quarters. The current payout is 12.5 cents per common share, higher than it was before COVID. At the current rate, the dividend is annualized at 50 cents per common share and yields a yield of 8.1%.
Maxim analyst Michael Diana covers this headline and is impressed with the quality of the company. In one example, he writes: “Even when demand was low, management remained disciplined in their credit standards. LOAN has never had to foreclose on a property and has never experienced a default (although it has had loan renewals and extensions). This record for irreproachable credit quality was preserved in 3Q21. “
In light of these comments, Diana gives LOAN a buy rating, along with a price target of $ 7 which indicates a potential rise of 14% over the coming year. (To look at Diana’s background, Click here)
Diana summed up: “Our purchase score reflects our confidence in LOAN’s long-term ability to combine strong loan origins with impeccable credit quality…”
Some actions go unnoticed, and LOAN is one of them. Diana is this company’s only analyst review, and it’s decidedly positive. (See LOAN stock analysis on TipRanks)
New York Mortgage Trust (NYMT)
The last dividend-paying stock we’re looking at is another REIT. New York Mortgage Trust maintains a portfolio valued at $ 3.2 billion, which leans heavily – about 49% – toward residential mortgages. Another 15% is structured multi-family investments, i.e. loans to developers for the construction of apartment complexes, and 22% of the total is residential mortgage-backed securities.
The New York Mortgage Trust has seen its revenues and profits languish at low levels since the COVID pandemic hit the company last year. Although both measurements returned to positive readings, neither fully recovered. In 2Q21, the company reported $ 59.5 million in revenue and EPS of 11 cents. At the height of the pandemic, the company cut its dividend payment from 20 cents per common share to 5 cents. Despite these weak indicators, the company had a strong balance sheet, with more than $ 397 million in cash and liquid assets at the end of the second quarter. The stock performed well, rounding up sharply from the lows seen last year and appreciating 80% over the past 12 months.
In a move of investor interest, New York Mortgage Trust in the fourth quarter of last year increased its dividend payout to 10 cents per common share, doubled its floor during the COVID crisis, and has since maintained it at this level. The current dividend declaration is 4 quarters in a row with a payment of 10 cents to common shareholders. At the annualized rate of 40 cents, that works out to a solid 9%.
Once again, we’ll check with Maxim’s 5-star analyst, Michael Diana, who says of this company: “NYMT’s strong balance sheet, low leverage and broad pipeline of business opportunities. investment should enable it to deploy its abundant liquidity in mortgage credit assets (mainly loans). This should increase profits, including recurring net interest income, and potentially position the company for a dividend increase in 2022. “
The analyst added, “NYMT shares are currently trading at 0.92 times book value. In our view, a mortgage REIT like NYMT, with a good history of book value preservation, should trade at least in line with its high quality peers.
In keeping with her bullish approach, Diana gives the NYMT stock a buy rating, and her price target of $ 5 suggests a 12% rise for the coming year. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of around 21%.
Overall, this stock achieves a moderate buy consensus rating, based on 2 buy and 1 hold. The stocks are priced at $ 4.43 and their average target of $ 5 matches Diana’s (see NYMT stock analysis on TipRanks)
To find great ideas for dividend-paying stocks traded at attractive valuations, visit TipRanks Best Stocks to Buy, a recently launched tool that brings together all the information about TipRanks stocks.
Disclaimer: The opinions expressed in this article are solely those of the analysts presented. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.