Stock: ABR
Rating: Buy
Author: Waleed M. Tariq
Summary
- I expect Arbor Realty Trust to grow with post-inflation economic growth.
- Rising interest rates threaten the mREIT’s net interest income.
- The company has 7 consecutive quarters of dividend growth.
Bullish
- In 2021, the company issued 23,000,000 preferred shares at 6.34 percent. Series A, B, and C preferred stock were redeemed for $93.3 million at 8.14%.
- The corporation has shown 7 consecutive quarters and 10 years of dividend growth.
- The company’s revenue, growth, and debt management reflect efficient management.
Bearish
- Mortgage REIT book value and stock prices may be affected by rate hikes.
Mortgage REITs
- mREITs profit from their net interest margin, or the spread between mortgage interest income and mortgage and MBS funding costs.
Arbor’s Performance
- Net interest income climbed 49%, but net income grew 94% to $317.4 million, yielding $2.28 per diluted common share and $2.01 in 2021, a 15% gain over 2020.
Debt Structure Improvements
- Arbor’s average loan cost declined to 2.65% from 2.76% in the third quarter. The company’s debt portfolio averages 4.26 percent in 2021, down from 5.23 percent in 2020.
Strong Dividend Growth
- Arbor raised its dividend for the seventh straight quarter and tenth year to $0.37 per share payable in March, exceeding the mREITs sector average of 7.4%.
Conclusion
- Stocks are down 7% YTD due to rate rise predictions. The stock is well-positioned for passive income investors despite rate hike fears.