Broadmark has managed to grow its loan portfolio and increase interest and fee income in recent years. Since the trust has no financing costs, its credit margins are exceptional. That said, if Broadmark expands its loan portfolio, the additional operating income generated from the earnings gains will be substantial.
Source: Investor Presentation
We see this trait continue as the trust had more than $ 200 million in cash on its balance sheet as of the end of the first quarter, so it has sufficient capital to continue its lending activity. Broadmark, on the other hand, is experiencing significant weakness in its loan portfolio due to the impact of COVID-19.
Broadmark real estate weakly announced Results results for the year 2021 first quarter. R.Eve 7.3% to 29.5. sunk Millions, estimates of $ 2.8 million missing. Adjusted result–Per–Share of $ 0.19th was 9.5% lower than last year.
Broadmark Realty was born $191.9 Million dollar loans and changes for the quarter. First-Quarterly occurrence was a 1.5% decline sequentially, and at a weighted average loan-to-value ratio of 63%.
From05.03.2021, Broadmark Realty had 29 Loans in compatible defaultwhat does not include five Loans with Cease and desist agreements. Risk provisioning in the lending business was $ 2.7 million, or 2.1% of the total loan portfolio. Trademark Realty is set to make $ 0.88 per share in 2021.
Broadmark maintains a positive growth outlook with a strong balance sheet. In fact, there are essentially no limits to how much she can add to her loan portfolio, especially if she decides to take out debt to add to the portfolio.
However, we are still wary of its reliance on two relatively narrow geographic areas as well as its reliance on home loans. We believe Broadmark can add 3% per year to FFO but caution investors that it had a high number of defaults at the end of the first quarter and that Broadmark has very little history as it has only recently been public . This means that the risks for Broadmark are slightly higher than for some other REITs.
Broadmark’s dividend payment in December 2019 was $ 0.12 per share. Since then, the monthly dividend has subsequently been reduced twice to $ 0.08 per share and then to $ 0.06 per share. In January 2021, Broadmark increased its monthly dividend to $ 0.07 per share, where it currently sits.
Still, with an annualized payout of $ 0.84 per share, Broadmark stock currently has a yield of 7.8%, which is more than five times the average dividend yield of the S&P 500 index. With a high dividend yield and monthly payments, Broadmark stock is attractive from an income perspective.
However, the sustainability of Broadmark’s dividends is an ongoing issue. The company has a history of dividend cuts and coverage remains tight. We expect Broadmark to generate between $ 0.88 in FFO per share, or “core earnings,” as the Trust put it in its Q1 release this year, which means dividend coverage is relatively poor.
We expect Broadmark to pay out essentially all of its FFO this year, which means that if the credit market worsens, the payout may be cut again.
Broadmark is likely to be able to afford the current $ 0.84 annual payout that it can use to fund deficits between FFO and declared dividends due to the high level of cash on its balance sheet. Of course, this is not sustainable in the long run.
It also means that the prospect for dividend growth isn’t particularly great at Broadmark. Sustainable dividend growth is likely to be an issue for a long time to come.
While Broadmark’s high dividend yield and monthly payment plan are attractive, investors should be careful. The company’s performance in the first quarter was relatively poor and the payout ratio is quite high. This jeopardizes the dividend distribution.
Given these factors, we don’t view Broadmark as a safe dividend stock and would recommend investors keep it on until the outlook for their portfolio improves. Overall, Broadmark’s inherent risk is much higher than other REITs.