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New York Mortgage Trust Dividend Sustainability Analysis

Summary

NYMT has a huge dividend yield and it simply isn’t sustainable.

The sustainable yields run around 8% to 11% of book value depending on how aggressively the mortgage REIT positions the portfolio.

A quick comparison to several peers demonstrates that the dividend is materially above the normal levels.

New York Mortgage Trust (NASDAQ:NYMT) is in a difficult situation. Their book value got hammered as assets fell out of favor and shareholders were in a panic when they reported their Q4 data a couple ago. The first quarter was much better for NYMT, but the thing investors are still wondering about is the sustainability of the dividend. In my opinion, there is very little chance of the dividend being maintained.

To demonstrate my expectations for a dividend cut, I am using a comparison with several of others. The following table demonstrates mortgage REITs that have preferred shares. Since preferred shares are one of my favorite areas for investing, I put quite a bit of work into preparing models on the preferred shares to ensure I'm getting a great deal when I buy in.

The quickest way to get a rough estimate on the probability of the dividend being sustained is to take a look at the dividend yield on the share price and the dividend as a function of book value. The mortgage REITs with materially higher yields are those that are most likely to have to cut their dividends. The market makes mistakes, but I wouldn't want to rely on a huge failure here.

The following chart demonstrates the yield on the share prices from late in the trading day on 05/12/2016. The yield on...


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