My Top High-Yield Stock To Own In 2017
With an 11% yield, growing cash flows, and a whip-smart management team, this stock takes the podium as one of Tim Plaehn’s “Top Stocks to Own in 2017.” If you don’t own this stock, then you’re missing out on a once-a-year opportunity to earn a high-yield income on a stock that also has huge upside potential.
New Residential announced its 2016 first quarter earnings on Monday, May 1. On the same day, the company announced a deal with Ocwen to purchase the balance of the mortgage servicing rights (MSRs) from Ocwen on the MSRs which New Residential already held the excess rights. The earnings report also revealed great news about the future profits for NRZ. This doubled barrel news event points to ongoing great returns for NRZ investors.
New Residential owns excess MSRs on $117 billion of unpaid mortgage balance (UPB) where the primary servicing rights are owned by Ocwen. The new agreement has New Residential paying Ocwen $495 million for its share of those MSRs and then contracting with Ocwen to remain as the servicing company for the next five years.
When the deal closes, NRZ will have complete control over that large amount of MSRs. Ocwen gets a needed cash infusion. During the earnings conference call, NRZ CEO Michael Nierenberg indicated that he expects New Residential will earn its usual mid-teens target return on the investment.
My back-of-the-napkin calculation results in a roughly 20 cents per share annual net income increase. With this deal, NRZ has protected its interests, increased its profits, and supported an important business partner. These are the kinds of actions I have come to expect from the NRZ management team.
There were several pieces of very positive data in the first quarter earnings report. During the quarter, NRZ did a secondary common stock issuance. The capital raise increased the number of common shares from 251 million to 307 million, a 22% increase. New Residential did not have time in the first quarter to put the new money to work, but the existing business generated enough cash flow to cover the new higher $0.48 per share dividend on all of the 307 million outstanding shares.
During the quarter, the company acquired or agreed to acquire MSRs totaling $176 billion UPB for an aggregate purchase price of $1.6 billion. These new investments will provide a large boost to income per share starting in the second quarter. New Residential has been acquiring non-agency mortgage securities call rights and now controls about one-third of the total non-agency MBS market.
The company calls these loans and repackages the remaining mortgage into new MBS, which are held or sold. This is a line of business where profits are growing rapidly quarter over quarter. During the quarter, NRZ also became part of a four-member consortium which agreed to purchase up to $5 billion of unsecured consumer loans on a forward flow basis from Prosper Marketplace.
During the earnings call, Nierenberg indicated these loan investments could generate annual returns in the mid-20% range. Business and profits are growing from all of New Residential’s major lines of business.
The sell-off in NRZ shares two weeks ago was a great buying opportunity. If you missed it, the stock still yields 11% and I expect both the dividend rate and share price to continue to move higher. New Residential has again proven it is one of the best high-yield stocks in the market.
With banks paying such low yields on savings, anyone nearing retirement or already in it needs to develop a secondary income stream that can supplement their life. That’s the reality of the low-yield environment that we live in today.
But, finding the right income stocks, the ones that pay 7%, 8%, even 18% every year just like clockwork takes hours of research.
Many investors spend hours researching what stocks to buy, only to end up more confused than when they started.
There are thousands of stocks to choose from, but only a small percentage of that group are the right stocks for you to own.
That’s why I started my income letter, The Dividend Hunter, which uses my Monthly Dividend Paycheck Calendar tool to help investors start earning a reliable income stream from dividend paychecks.
The Calendar tells you when you need to own the stock, when to expect your next payout, and how much you can make from these low-risk, buy and hold stocks paying upwards of 12%, 13%, even 18%. I’ve done all the research and hard work, you just have to pick the stocks and how much you want to get paid.
The next critical date is Thursday, May 11th (it’s closer than you think), so you’ll want to take action before that date to make sure you don’t miss out. This time, we’re gearing up for an extra $2,846.70 in payouts by June 15th, but only if you’re on the list before May 11th. Click here to find out more about this unique, easy way of collecting monthly dividends.
Category: Dividend Stocks
