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Is SMHD's 22% Yield Sustainable?

Published Sun, 24 Feb 2019 17:14:25 -0500 on Seeking Alpha

This article was first published on February 10, 2019.
In our latest ETN snapshot, ETRACS Monthly Pay 2xLeveraged US Small Cap High Dividend ETN (SMHD) became the highest yielding 2x ETN with a trailing-twelve months [ttm] yield of 21.8%, taking the mantle from the MRRL (21.8%) and MORL (21.7%) combo (note that MRRL yields slightly higher than MORL due to the latter's premium).
It is natural to ask the question: is SMHD's yield sustainable?
Distribution history and growth
In last month's snapshot, we calculated the new calendar 1-year DGRs and found that SMHD's dividend in 2018 ($3.28) was reduced by -8% compared to the previous year ($3.57). In contrast, 2017's dividend was a 26% increase from the dividend paid in 2016 ($2.84). (SMHD was incepted in 2015, so a full year of dividends is not available that year).

We can also see from the chart below that SMHD generally pays one "big" month of dividends followed by two "small" months. The big months are in January, April, July and October of each year. Last month's (January's) dividend was a big month of $0.42, compared to $0.56 in 2018.

Data by YCharts
Unfortunately, I expect that the dividend may be lower again in 2019 than in 2018, due to the lower share price of the note. As can be seen from the chart above, SMHD started 2017 at around the $24 level, however, it started 2018 at around $20. Currently, SMHD's share price is around $16. Absent a recovery in the underlying stock prices, we may... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
GAMESTOP 4.58   0.0 -10.70 0.00 33.12
B&G FOODS 19.58   7.2 2.72 1.90 9.75
APOLLO COMMERCIAL REAL ESTATE FINANCE 19.35   12.6 1.54 1.84 9.57
TANGER FACTORY OUTLET CENTERS 16.50   21.4 0.77 1.42 8.35
LADDER CAPITAL 17.14   12.1 1.42 1.36 7.96
SENIOR HOUSING PROPERTIES 8.89   0.0 -0.34 0.60 6.73
MOELIS & COMPANY 34.79   16.4 2.12 2.00 5.82
OUTFRONT MEDIA 27.33   24.4 1.12 1.44 5.59
COMPASS MINERALS INTERNATIONAL 57.29   33.1 1.73 2.88 5.35
PITNEY BOWES 4.49   5.8 0.77 0.20 4.51
 

GAMESTOP - GME
GAMESTOP - GME  


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