Handing out only a third of profit yet still paying 7% a year
A branchless bank pays 7% a year and needs only a third of its profit for the dividend. Now management is deliberately lowering its own profit. Is it a trap for dividend investors, or a rare opportunity the market is overlooking?
Key points
A bank without a single branch pays nearly 7% a year and needs only a third of its profit for the dividend
In August, management lowered its 2026 profit outlook, and it wasn't because of losses
The stock trades below the company's tangible book value and at five times last year's earnings
In 2023, the company cut its quarterly payout by 74%, and investors still haven't forgotten
The founder admitted on the conference call that past-due loans will rise, and explained why
A branchless bank that even Wall Street can't categorize
Imagine a bank with no branches, no ATMs, and no traditional bankers in suits. A customer opens an account online, talks to support via video, and gets a loan through software that management calls its biggest competitive advantage. That's NewtekOne $NEWT, a company founded in 1998 by Barry Sloane that still serves exclusively self-employed individuals and small businesses in the United States.
In 2023, it bought a small bank with $180 million in assets and $140 million in deposits. In three and a half years, it turned it into an institution holding $2.15 billion in deposits across roughly 40,000 accounts. That's fifteen times the original level. The bank's own cost efficiency is around 40%, a level most regional banks can only dream of.
Yet the company has a market cap of only about $0.31 billion, is followed by a handful of analysts, and the stock trades around $10.90, roughly 30% below its year-to-date high. The reason is simple: NewtekOne doesn't fit into any box. For bank funds, it's too small and too technology-driven; for fintech funds, it's too regulated a bank. And for indices, it's simply too small.