Sachem Capital (SACH) is mortgage REIT that specializes in originating real estate backed loans to commercial clients and house "flippers", observes Rida Morwa, income expert and founding partner of High Dividend Opportunities.
Sachem Capital is a newer REIT that went public in 2017 and has rapidly grown. The stock — our Top Pick for more speculative growth — carries a gigantic yield of 8.2%.
Their key focus has primarily been on residential fix and flip properties with loans bearing interest rates of over 10% and durations of 1-3 years. SACH has strong conservative roots in its loan origination practices keeping loan-to-value levels below 70%.
So why is Sachem a top pick for 2022?
- First SACH is a bet on the housing boom in the United States.
- It invests in some of the best geographic location where real estate prices are soaring.
- The company has a proven ability for enormous growth. We expect over 25% share price growth and several dividends hikes too.
- SACH has inked a new credit line with Wells Fargo for 1.5% and a master repurchase agreement for 4%, cutting their cost of capital by over 50%. Furthermore, they have been very active in replacing their higher-cost baby bonds with lower-rate ones.
- All of this translates to more income falling to their bottom line.
- As a REIT, Sachem must payout 90% of their taxable revenue, the other 10% can go back to raise their book value per share. Sachem has also effectively grown this each quarter before their newly reduce cost of capital.
Housing stocks for new homes in the US are severely below demand. Older homes are being rapidly fixed and resold to buyers looking to own a piece of the American dream. Most of these companies do not want the long delays tied to the loan process of major financial institutions, this is where SACH fills a niche need.
Furthermore, SACH has exposure to Connecticut, Florida and Texas — all places with strong population growth or limited room to build new homes. There has been no lack of demand for SACH's loans, and their high dividend yield attracts investors to bid up their share price, as their earnings and therefore dividend grows so too will their share price continue to rise.
Sachem returned 49% in 2021 in share price value gain alone, smashing the market indexes, and we expect over 50% returns in the next two years strongly outperforming the market.
A Look Back at 2021's Top Performers
Last year, Rida Morwa, editor of High Yield Opportunities, chose NEWTEK (NEWT) as his Top Pick for 2021. Here's his latest update on the company:
NEWT's upside is not the entire story. The stock went up by 49%, but you need to add the dividend paid during the year to get an accurate performance. The dividend yield on NEWT was at 10% at the time of our recommendation, and NEWT managed to hike it during the year. The total returns were actually 65% (which is 49% plus 16%)
The Business Development Company lends and invest in small and medium size U.S. businesses. Investing in NEWT was effectively a bet on the recovery of the U.S. economy. I follow my belief that one should never bet against America, and NEWT plays a big role in keeping it going!