Three mortgage brokerages have been recommended as sound investments to the Australian public by stock analysis website The Motley Fool.
Considering mortgage company stocks for investment when the housing market is growing may be a good way to take advantage of an economic upturn, wrote investment commentator Darryl Date-Shappard for the site earlier this week.
Australian Prudential Regulations Authority data for February show of the $1,231 billion lent in the month, 84.3% of investment and owner-occupied loans were from the big four banks.
But while the majors control most of the residential home loan market, there are mortgage companies still operating successfully in the remaining niche and there could be a number of years left in housing finance and new home construction growth before it runs its cyclical course, Date-Shappard said.
He recommended investors consider Mystate, with its two subsidiaries, Mystate Financial and The Rock Building Society.
Mystate’s net interest income has grown steadily in the past three years, with net profit rising in that time from $17 million to $28 million. The company expects at least the same net profit after tax for H2 FY2014 as in the first half, and offers a 6.4% dividend yield, Date-Shappard said.
He also recommended Mortgage Choice
, which reported a record result in the first half of FY2014. Its net profit after tax was $9.7m for the six months to 31 December 2013 – a 28.5% increase on the first half of the year.
Low interest rates make market conditions good for further progress and its dividend yield is 5.0%.
Date-Shappard’s final recommendation for investors was Yellow Brick Road, achieved 59% growth in revenue and a 4% net profit rise in the first half of FY2014, achieving $740 million in loan settlements in the interim period.
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