Wednesday, March 2, 2022

An Ever-Improving 8.3%-Yielding REIT

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AN OXFORD CLUB PUBLICATION

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No Worries About the Dividend of This 8.3% Yielder

Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Marc Lichtenfeld

I've covered mortgage real estate investment trust (REIT) Arbor Realty Trust (NYSE: ABR) in each of the past two years.

My first review of it was in June of 2020 in the midst of the pandemic. At the time, I said shareholders didn't have much to worry about when it came to their dividend.

In 2021, I called the dividend "even safer."

So now that we're into 2022, where does the dividend stand?

Arbor Realty Trust has raised its dividend in each of the past seven quarters and for the past nine years in a row. The current $0.37 per share quarterly dividend equals an 8.3% yield.

Even more impressive is the steady rise in net interest income - what we use to measure a mortgage REIT's ability to pay its dividend.

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Last year when I wrote about Arbor, I mentioned that net interest income was expected to come in at $220.7 million in 2021. Arbor handily beat that estimate, with net interest income coming in at $254.1 million.

This year, net interest income is projected to spike 30% to $330.7 million.

Arbor Realty Trust's Net Interest Income
 

Since the company is expected to pay out $228.2 million in dividends, it has plenty of room to raise the dividend.

Last year, the payout ratio (the percentage of net interest income paid out in dividends) was 89%. This year, it's expected to drop to 69%. I suspect the company will pay more in dividends in 2022 than Wall Street anticipates.

Arbor Realty Trust's dividend not only is very safe but will very likely be raised again this year for the 10th straight year.

Dividend Safety Rating: A

Dividend Grade Guide
 

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Good investing,

Marc

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