Arbor Realty meets all 3 criteria and was added to the High Yield Portfolio today.
Arbor Realty's trailing P/E is only 7.0 and has a dividend yield of 13.6% based on the acquisition price of $12.69/share. Shares were added this morning. The consensus one year price target is $15.25/share which provides a potential upside of 20% in capital appreciation and 33.6% when combined with the dividend. There are 3 buys however there are 2 sells which adds risk to adding this stock to the portfolio.
The risk to future payouts is clearly the stress in the CRE business and higher interest rates. The shares are heavily shorted. I made this investment based on my belief the Fed will eventually cut rates this year and that should stabilize the CRE industry.
Below is a link to Arbor Realty Q1 2023 presentation that provides a background and management's assessment of risk and their risk mitigation.
The company has increased the dividend over the last several years ($.30/share in 2020 to $.43/share last quarter.
Current Portfolio Performance Recap
The portfolio has a current yield of 9.4% (acquired yield of 10.2%), average P/E of 9.1. The potential capital appreciation upside is 22.1% based on the consensus 1 year price target. To date the portfolio has capital appreciation is 9.3% driven by the strong performance of OneMain Financial (OMF).
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