Written by SmallCapPower.com
New York Mortgage Trust, Inc. (NASDAQ: NYMT) is a real estate investment trust (REIT), which is in the business of acquiring, investing in, financing, and managing mortgage-related and residential housing-related assets and financial assets. The Company’s assets include agency and non-agency mortgage-backed securities, high credit quality residential adjustable rate mortgage loans, commercial mortgage loans, and other financial assets.
Over the past few years New York Mortgage Trust has made it their objective to exit their low-margin agency securities and redeploy the capital into more profitable multi-family and distressed residential mortgages. This is best seen by the Company acquiring the remaining 80% of RiverBanc on May 16, 2016, for $53.5mm. RiverBanc manages investments in multi-family apartment properties. New York Mortgage Trust expects to achieve $25.2mm of cost synergies from RiverBanc. So far, they have been able to derive ~$3mm of these as seen in increased margins in their multi-family portfolio, which has been partially offset by a ~$1mm increase in SG&A due to increased headcount as a result of the acquisition.
Even if the Company’s efforts to increase net interest margins succeeds, it is unreasonable to think they can sustain such a high dividend payment (15% yield), given their constant inability to generate enough earnings, or cash flows to cover the $89mm ($0.8 per share) dividend.
- New York Mortgage Trust has paid out over 100% of their earnings and operating cash flow for nine straight quarters.
- The Company must successfully allocate all their agency funds into multi-family mortgages, and achieve their desired synergies, which carries risks of its own.
Over the past nine quarters, New York Mortgage Trust hasn’t even come close to covering their dividend payment with earnings or cash flow. This has resulted in a decrease in the Company’s book value per share. The arithmetic is simple:
