Re-examining NEWT following late day pickup

 

 

Blue Chip favorite: NEWT seeing a late day thrust....recall the stock ran from 12s to 14s late dec/early jan...after month long basing in the lower 14s, looks like the stock is making a new leg up....Target breaking 15 initially near term.

P/E (ttm):	14.29
EPS (ttm):	1.03
Div & Yield:	1.52 (10.50%

Recall an older NBT story on them that went into considerable detail on a company pr announcing an unheard of 12% annual dividend....And quite frankly why the company stock was and is still a steal.

 

Newtek Business Services Corp. (NEWT) Expects Annual Cash Dividend of @ $12.4% Cash Yield in 2015

By Tobin Smith | January 12, 2015, 1:40pm

On Dec. 29, 2014, Newtek Business Services Corp (NEWT), a newly formed development company ("BDC"), announced that it currently expects to pay an annual cash dividend⁽¹⁾ of approximately $1.80 per share for 2015, payable quarterly from anticipated taxable earnings based on 10,206,323 shares of the Company's Common Stock outstanding as of December 22, 2014.

The Company currently expects its dividend payable for the first quarter of 2015 will be $0.38 per share, which is expected to be declared on April 6, 2015 and payable on April 13, 2015 to shareholders of record on March 30, 2015.

Understand this: Announcing dividend guidance for an entire year is extremely rare in the BDC or any income producing listed security.

But the reason Newtek can deliver on this forecast is the highly predictable nature of its operating subsidiaries. They have been in business since 1999 and went public on the NASDAQ in mid-2000. They have built their operating companies that provide vital business operation services to small-to-midsized U.S. based businesses for 15 years.

As opposed to most Business Development Corporations (which are structurally just like closed-end mutual funds) with a large portfolio of loans/equity participations in hundreds of companies, NEWT has 500+ SBA loans they originate, securitize and then service—the business risk retained is about 10% of their $billion+ load portfolio.

In other words, highly stable.

In addition—the operating subsidiaries of NEWT are companies they built and have owned for more than a decade…they too are service businesses with highly stable cash flows.

The BIG News is Coming—20% Annual Cash-on-Cash Yield for…Ever?

NEWT announced in their recent investor presentation they expect to pay 20% cash/80% stock for their one-time Special Dividend required by their conversion to BDC structure.

In their prospectus from their recent $32 million raise, they forecast @$4.50 for that one-time dividend.

So in short…add $1.80 and $4.50 together and you get $6.30 in cash/stock dividends in the first twelve months of ownership of the stock…or a 43.4% return in the first year from your $14.50 investment.

IF you own these shares in a qualified pension plan—IRA/SEP Pension/Defined Pension Plan/401-k this return is of course tax deferred or tax free in the case of a ROTH IRA.

Either way…with the NEWT earnings growth from their recent raise easily 7-10% in 2016 (based on their 30% ROE from SBA lending or $9M Gross Profit) 2016 dividends on an investors NEW cost basis (after one-time distribution of $4.50) at a minimum is $2 annualized.

$2 cash-on-cash return with a $10 cost basis ($4.50 one-time qualified dividend on $14.50 cost basis) looks like 20% a year…for the foreseeable future. Since by regulation they have to dividend 90% of their earnings, and since their gross earnings are so predictable…that 20% cash-on-cash return is about as steady as an investor can count on.

In about 5 years you will have received @ 100% of your original investment back…yet would substantially MORE shares (with your one-time share dividend).

In short…for investors with IRA/401-k/Defined Pension Plans this is a MUST BUY stock on ANY pull-backs near $14.50.

20% a year cash-on-cash return for life? I love the sound of that!

About Newtek Business Services Corp.

Newtek Business Services Corp. , The Small Business Authority^®, is the Authority for the small- and medium-sized business (SMB) market providing a wide range of business services and financial products under the Newtek^® brand. Since 1999, Newtek has provided state-of-the-art, cost-efficient products and services and efficient business strategies to over 100,000 business accounts across all 50 States to help them grow their sales, control their expenses and reduce their risk.

Newtek's products and services include:The Newtek Advantage^™,Electronic Payment Processing,The Secure Gateway,Managed Technology Solutions (Cloud Computing),eCommerce,Business Lending,Insurance Services,Web Services,Data Backup, Storage and Retrieval,Accounts Receivable Financing and Payroll.

Check out our exclusive interview with the CEO of Newtek.

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