Super Stock Blog

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Month: May 2020

Granite Point Mortgage Trust – Strong Buy!

Granite Point Mortgage Trust (GPMT) is a mortgage reit that purchases floating-rate mortgage loans. From the initial outlook, especially at this time, purchasing commercial loans is risky. That means their loans are not backed federally like agency debt. To remedy this concern, they do use less leverage than other mortgage reits. At 63% loan-to-value, they are more conservative in the other players in this space.

However, even with a 63% loan-to-value, there is still lots of risk for default. However, their earnings report showed from a couple weeks ago that their is plenty of upside in this stock. First, their book value was a very high $17.43. At their current stock price of $5, the stock is trading at a very discounted value that is more than 70% off. This is the most discounted mortgage reit out of all the stocks that invest in commercial loans.

Digging deeper into the earnings report, they reported that only one of their commercial loans did not make the payment for the quarter. That means 123 out of 124 of their mortgage loans are current. This shows that the management is experienced to handle this recession and are conservative to make the company can survive.

You might wonder why their price is so cheap compared to their competitors. One of the main issues is they suspended their dividend. Their competitors continued to pay a dividend which kept their stock price higher. The should be a positive for investors wishing to get into GPMT.

You get in at a very affordable price for a stock that will pay a strong yield over 10% when they put the dividend back in place. There was a sell-off when the dividend was suspended. Many expected that GPMT might go bankrupt or get “margin called” on their portfolio. However, none of this was true. The company was just acting conservatively and making sure they have enough reserves to handle the situation.

At the current price of $5, there is plenty of upside in the stock in both price appreciation and dividend yield. Their most recent dividend was $0.42 which was recorded on December 31, 2019. If that dividend gets reinstated on the 2nd half of 2020, you can expect a dividend yield of 33.6% at a purchase price at $5. I would be more conservative and expect them to put the yield at 10% though. Either way, the stock is really cheap and you have plenty of upside from here.

America First Multifamily Investors – Tax Exempt Income

ATAX, America First Multifamily Investors LP, holds mortgage revenue bonds in majority multifamily apartments and student housing. They hold the first lien on these buildings which means they are the first to be able to foreclose if the landlord cannot make payment. The company has been around for almost half a century and have been consistently paying dividends every quarter. They are a very conservative company with a very experienced team.

With the covid-19, there stock has had a dramatic drop from being over $8 to now being under $5. Since they offer a $0.50 per year dividend, you are getting over a 10% dividend at today’s levels. It’s rare to see the current price being below $5. Each time that it fell below $5 per share the stock ripped back upwards. For the long-term buy and hold investor, you are getting a nice 10% dividend that is majority backed by tax-free income.

That means if you have a federal income tax at 32% you still do not pay any taxes for the dividend that comes out of ATAX. They are able to do this by investing in low-income housing which gets tax benefits. Of course, not all their income is tax free, but they will do their best to make sure it is tax exempt.

With an experienced team in place and first lien holders to housing, America Family Multifamily Investors is a great long term investment. Even for those looking for appreciation, there is plenty of upside in this investment. I expect the price to spike upwards with the after stock market earnings call later today.