A quarterly cash dividend of $0.18 per share will be due on January 12, 2024, by Newtek Business Services Corp. (NASDAQ: NEWT), which is NewtekOne’s parent company.
In addition to maintaining its position as a market leader in financial services and business solutions, NewtekOne has increased its dividend payout to further demonstrate its dedication to its investors.
Reliable Dividend for Portfolio Diversity
Dividends account for 90% of Newtek’s taxable income due to the company’s history as a business development company (BDC).
Investors looking for a diversified portfolio with regular dividend payments have NewtekOne to consider because of its similarity to a real estate investment trust (REIT) or master limited partnership (MLP).
Given the present share price near $11.50, the dividend yield of 6.2% is quite attractive, amounting to $0.72 per share when the $0.18 dividend is annualized.
In addition to double-digit earnings growth, NewtekOne has provided investors with consistent dividend payments since coming public in 2014.
Solutions Driving Record Financial Performance
The phenomenal financial performance of NewtekOne, driven by the increasing demand for its portfolio of tech-enabled business solutions, is the engine that drives these substantial dividends.
Total revenues hit a new high in the third quarter of 2023, up 32% year-over-year, while net income attributable to common shareholders surged 78%.
In the first nine months of 2023, a total of $1.37 billion was borrowed. With its many accolades to its name, NewtekOne is the go-to company for SBA 7(a), SBA 504, and USDA loan solutions, all of which are supported by the federal government.
Originations will likely continue to surge, according to NewtekOne, due to rising rates fueling borrowing demand and greater SBA loan ceilings.
It is also seeing continued success with its tech-enabled strategy that focuses on specific verticals. As an example, the Newtek Merchant Solutions division has achieved a 25% increase in payment processing volume this year, reaching $5 billion per annum.
However, Newtek Technology Solutions’ web hosting services income has increased by 240% due to the exploding ecommerce sector. Cloud computing and managed IT services are two more areas where NewtekOne stands out.
Investing in Dividends & Transformation
After the 130% share price increase in 2021 and 2022, driven by dividends, NewtekOne bulls would claim that there is still potential for growth. The stock is selling at a low of 7.3 times the consensus yearly profits forecast of $1.15. Profits should continue to rise by 22% in 2024, according to analysts.
During its investor day presentation in November, NewtekOne outlined important objectives: 1) Increase Newtek Bank’s asset value to $10 billion; 2) Originate $20 billion worth of SBA 7(a) loans within the next five years; 3) Achieve $10 billion worth of yearly payment volume; and 4) Broaden our offers of cloud computing and managed IT services.
For many years to come, this expansion strategy, if carried out as planned, should sustain bottom line growth in the double digits. Not to mention, there’s more to the NewtekOne tale than just fundamentals and dividends.
Some of Newtek’s investment clients care about more than just the bottom line; the company is a certified B Corporation and has been an advocate for diversity and inclusion, sustainability, and responsible governance for quite some time.
While NewtekOne keeps pushing to deliver creative solutions to neglected sectors, the recent dividend announcement shows that business is doing well.
In the long term, that bodes well for dividend income and capital gains. This fascinating dividend growth tale is worth another look for investors looking for a different kind of income.