Big Dividend Yield On Exciting Microcap

Written by GSCR Staff   
Tuesday, 10 June 2014 10:02

It is not often that we feature a small cap stock because of its dividend but this situation is too good to pass up.

With very impressive profit margins, tiny financial player Manhattan Bridge Capital Inc., (NASDAQ – LOAN - $2.71) not only has a great stock symbol but appears to be a bridge to big potential returns as well.  The Company just announced it has raised its annual dividend, paid out quarterly, to $0.28 from $0.08, which represents a 10.3% annual dividend yield at current prices. The next dividend will be paid to shareholders of record as of July 10, 2014.  These moves are usually made by management teams seeking to generate interest in their stock and typically reflect favorable future prospects. 

Manhattan Bridge Capital offers short-term, secured, non–banking or “hard money” loans to real estate investors in Brooklyn, Queens, Bronx, Manhattan and Staten Island as well as Long Island and Westchester County. These one-year loans are used to fund the acquisition of properties located in the New York Metropolitan area and range in size from $50,000 to $1.4 million. Loans are principally secured by collateral consisting of real estate and are usually accompanied by personal guarantees from the principals of the businesses. Most of the loans provide for receipt of interest only during the term of the loan and a balloon payment at the end of the term.

While the real estate market isn’t in the best shape in many parts of the country, the New York metro area is on very solid footing, which is a great advantage for Manhattan Bridge Capital. Established in 1999, management has proven it has exceptional acumen for this business, as the company has never had a loan default.  With a policy of not lending more than 65% of the appraised value of the asset collateral, it is easy to see why the company has had a history of success.

If you elect to perform your own due diligence, do not be spooked by the company’s website. It is really poor and really old. In fact the copyright date is 2009. Clearly, this company does not generate business via the web. Rather, it derives its growth from existing relationships which reduces risk and enables the company to record unusually high profits.

As evidenced by the operating profit recorded in 1Q14, Manhattan Bridge Capital practically prints money. Revenue for the period grew by 14 percent to $609,000, up from $534,000 in 1Q13. Income from operations rose by 22% to $316,000, up from $258,000 last year. EPS of $0.05 was a penny ahead of the year-ago period.  The trailing twelve months EPS is $0.14 but clearly the dividend reflects a big rise from this level this year.

With a 10.3% dividend yield and great prospects ahead, LOAN appears to be a great play for those concerned that the market is getting a bit frothy. We expect some nice accumulation ahead (the stock just hit a new year high) on the dividend news which will likely decrease the yield and provide capital gains to shareholders as well.  If results are strong this stock could be an easy 20-25% gainer.  

 

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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