With a forward dividend yield of 19.2%, UWM Holdings (UWMC +1.25%) 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.
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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.
NYSE: UWMC
Key Data Points
In 2021, UWM reported revenue of around $3 billion. Last year, UWM's total revenue came in slightly above $3 billion. However, diluted earnings per share (EPS) came in at $0.66 in 2021, but in 2025, it was just $0.12.
Reaching past profitability levels was clearly an objective with UWM Holdings' plans to acquire mortgage REIT and loan servicing company Two Harbors Investment Corp. (TWO +0.25%), which it announced back in December. At that time, UWM's management touted that its $1.3 billion all-stock bid would be highly accretive to shareholders, paving the way for "continued dividends."
Unfortunately, last May, CrossCountry Mortgage, seeking to take advantage of UWM's falling stock price, emerged with a $10.80-per-share all-cash offer for Two Harbors. UWM's would-be target accepted the bid, terminating its prior plans. Although UWM stepped up with an alternative all-cash offer, Two Harbors shareholders approved the CrossCountry deal earlier this month.
Tread carefully, as the dividend remains highly uncertain
Based on sell-side consensus, EPS could hit $0.38 this year, nearly covering the stock's $0.40 in annual dividends. However, a reduction or full dividend suspension could still be in the cards.
As KBW analysts Bose George and Frankie Labetti argued earlier this month, UWM Holdings could reduce its debt-to-equity ratio from 3.1 to 2.2 by the end of 2027. If improvements in the housing market coincide with UWM conserving cash, it could set the company up for a much-anticipated recovery.
However, while the analysts may believe that a dividend suspension/cut won't lead to further downside, I'd lean toward caution. Shares could continue to pull back on a dividend cut, even as the market already anticipates one.
Also, keep in mind that the housing market continues to recalibrate. Couple that with the prospect of "higher for longer" interest rates persisting under Federal Reserve Chairman Kevin Warsh, and it's even easier to see why caution remains key. Whether you like this stock as a dividend payer or as a turnaround play, you may want to take your time before entering a position.
