Arrakis Global
Global Thematic Fund Manager
Starwood Property Trust's acquisition of Fundamental looks disastrous in retrospect, as Starwood pays out NAV while not earning its dividend. General pressure on rates and spreads adds to the damage after the stock was clobbered. The open question is when it becomes a buy, and whether it falls to Covid-era levels below $10 soon. x.comÂ
Starwood Property Trust's dividend remains uncovered, and elevated leverage limits its room to sustain the payout. Its 15.3% yield comes with a 132% payout ratio and a dividend frozen for over a decade; the estimated chance of a cut within 12 months is 65%. Rating: sell. x.comÂ
Realty Income's 20%+ correction is among the most attractive long-term opportunities in the market, since such drops in a blue-chip dividend REIT typically do not last. The business keeps performing, with AFFO per share up 3.8% year over year and 136 monthly dividend increases since its NYSE listing. The stock sits about 10% below its 200-week moving average with a historically oversold daily RSI. x.comÂ
Starwood Property Trust looks like a buy because most of its loans are floating rate and its servicing unit alone is immensely valuable and countercyclical. x.com x.comÂ
Realty Income is no longer interesting because, as a net-lease landlord, it earns only a thin financing spread, roughly a 5% dividend, which rising rates will squeeze further. It uses its capital scale to buy land and lease it back to operators. Its data-center move, $1.9B of a $6.7B commitment with partners including Digital Realty, uses the same spread model, and REITs accepting such spreads erode data-center leasing profits. Vertically integrated businesses are riskier but more worthwhile. … Show more
Gladstone Land's dividend is a sucker yield because operations do not cover it. Adjusted FFO was -$0.04 per share against a $0.14 quarterly dividend. Meanwhile, it is pledging more properties to boost liquidity and buying back preferred stock, a warning sign rather than dividend coverage. x.comÂ
