With a forward dividend yield of 19.2%, UWM Holdings (NYSE: UWMC) may seem like a golden opportunity for yield-hungry investors.
But while this may represent an extremely high yield, especially for a high-profile financial stock, I wouldn’t count on buying it, collecting the double-digit yield, and generating above-average total returns
UWM’s newfound status as a high-yield dividend stock is largely due to its share price collapse. Put simply, the market thinks that the mortgage wholesaler’s high payout won’t last. Even though the stock’s valuation may account for a possible dividend suspension, such an event, along with other potential negative developments, could lead to further significant losses.
UWM missed out on a merger and has questionable payout sustainability UWM, America’s largest home lender, has struggled since the Federal Reserve began raising interest rates in 2022. Although revenue has bounced back from a steep drop, the company remains far from its pandemic-era high-water mark for profitability. In 2021, UWM reported revenue of around $3 billion.