4 Mortgage REITs Generating Solid Returns

: RITM | Rithm Capital Corp. News, Ratings, and Charts

RITM – Despite facing challenges from rising interest rates, a potential rate cut this year should provide a favorable outlook for the mortgage real estate sector. So, fundamentally solid mortgage REITs KKR Real Estate Finance (KREF), BrightSpire Capital (BRSP), Lument Finance (LFT), and Rithm Capital (RITM) might be ideal buys for solid returns. Read more…

MREITs, or mortgage real estate investment trusts, operate similarly to traditional REITs but focus on purchasing individual mortgages and mortgage-backed securities instead of physical properties. They mitigate duration risk and primarily rely on mortgage spreads for returns.

In this article, let us analyze robust mortgage REITs KKR Real Estate Finance Trust Inc. (KREF), BrightSpire Capital, Inc. (BRSP), Lument Finance Trust, Inc. (LFT), and Rithm Capital Corp. (RITM), which could be ideal buys for massive returns.

REITs offer investors reliable income and growth potential by investing in income-producing commercial real estate. However, what makes MREITs stand out is its dividend yield. Mortgage REITs typically distribute a significant portion of their earnings as dividends, making them an attractive option for income-seeking investors.

Additionally, as the Fed holds steady on the benchmark rate and hints at a potential three-quarter-percentage-point cut by year-end, now is an opportune time to invest in REITs. This favorable environment, with projections for lower interest rates, boosts the rate-sensitive REIT industry. Besides, a resilient economy supports leasing activity, driving demand for real estate and strengthening REITs’ earnings and dividends.

Further, the decline in mortgage rates, from an average of 7.4% in November 2023 to 6.8% and 6.6% in December 2023 and January 2024, respectively, contributed to the recovery of home sales from the lows of 2023.

Considering the industry tailwinds, let us now analyze the top REITs – Mortgage stocks, starting with the fourth choice:

Stock #4: KKR Real Estate Finance Trust Inc. (KREF)

KREF primarily deals in transitional senior loans secured by commercial real estate (CRE) assets. It focuses on originating and acquiring these loans and other credit investments related to CRE, including leveraged and unleveraged commercial real estate loans.

On February 1, 2024, KREF declared a dividend of $0.40625 per each issued and outstanding share of the company’s 6.50% Series A Cumulative Redeemable Preferred Stock, which represents an annual dividend of $1.625 per share. The dividend is payable on March 15, 2024. Its annual dividend yields 10.14% on the prevailing price level.

In the fiscal year that ended December 31, 2023, KREF’s interest income increased 51.8% from the previous year to $640.41 million. Its total net interest income stood at $181.61 million. Its total other income rose 10.4% year-over-year to $21.20 million. Moreover, during the year, the company reported it had $101.02 million in real estate-owned assets held for sale.

KREF’s EPS is estimated to rise 16.9% year-over-year to $0.97 in the fiscal year 2024.

The stock declined 2% intraday to close the last trading session at $9.86.

KREF’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has a B for Growth and Sentiment. It is ranked #4 in the 27-stock REITs – Mortgage industry.

Click here to access KREF’s Value, Momentum, Stability, and Quality.

Stock #3: BrightSpire Capital, Inc. (BRSP)

BRSP operates as a commercial REIT in the United States. The company engages in originating, acquiring, financing, and managing a portfolio of CRE senior mortgage loans, mezzanine loans, preferred equity, debt securities, and net leased properties.

On March 15, BRSP declared a quarterly dividend of $0.20 per share on its class A common stock, which is payable to shareholders on April 15, 2024. Its annual dividend of $0.80 yields 12.12% on prevailing prices, higher than its four-year average dividend yield of 9.84%.

During the fiscal year that ended December 31, BRSP’s interest income increased 26.5% year-over-year to $298.70 million. Its net interest income stood at $125.39 million. Adjusted distributable earnings attributable to common stockholders amounted to $138.18 million and $1.06 per share.

BRSP’s EPS is expected to grow 200% year-over-year to $0.9 in the fiscal first quarter ended March 2024. It has surpassed revenue estimates in three of the trailing four quarters, which is impressive.

The stock has gained 11.9% over the past year to close its last trading session at $6.60.

It is no surprise that BRSP has an overall B rating, which translates to Buy in our POWR Rating system.

The stock also has a B grade in Growth and Sentiment. Within the same industry, it is ranked #3.

To see BRSP’s additional Momentum, Value, Stability, and Quality grades, click here.

Stock #2: Lument Finance Trust, Inc. (LFT)

LFT specializes in investing in, financing, and managing commercial real estate (CRE) debt investments across the United States. Its portfolio includes transitional floating rate CRE mortgage loans on middle-market multi-family assets, as well as various other CRE-related investments such as mezzanine loans, preferred equity, and commercial mortgage-backed securities.

On March 16, 2024, LFT declared a cash dividend of $0.07 per share of common stock for the first quarter of 2024, payable on April 15, 2024. Additionally, a cash dividend of $0.4921875 per share was declared for the 7.875% Cumulative Redeemable Series A Preferred Stock, payable on the same day as above.

LFT pays an annual dividend of $0.28, which translates to a yield of 11.24% at the current share price. Its four-year average dividend yield is 11.96%.

During the fiscal year that ended December 31, 2023, LFT’s net interest income increased 44.1% year-over-year to $34.39 million. Its net income improved 99.9% and 163.6%from the previous year to $19.72 million and $0.29 per share.

Street expects LFT’s revenue for the fiscal second quarter (ending June 2024) to increase 23.2% year-over-year to $9.47 million, and its EPS is expected to grow 150% year-over-year to $0.10 for the current quarter.

LFT’s shares have gained 24.3% over the past year to close the last trading session at $2.51.

LFT’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has a B grade for Quality. Within the same industry, LFT is ranked #2.

In addition to the POWR Ratings highlighted above, one can check LFT’s ratings for Growth, Value, Sentiment, Stability, and Momentum here.

Stock #1: Rithm Capital Corp. (RITM)

RITM is an asset manager specializing in real estate, credit, and financial services. Its operations include origination, servicing, investment portfolios, mortgage loans, and asset management. The company’s investment portfolio includes mortgage servicing rights, real estate securities, residential mortgage loans, consumer and business loans, and asset management-related investments.

On March 20, RITM declared dividends for the first quarter of 2024. Common stockholders will receive $0.25 per share, payable on April 26, 2024. Preferred stockholders of Series A will receive $0.4687500 per share, Series B will receive $0.4453125 per share, Series C will receive $0.3984375 per share, and Series D will receive $0.4375000 per share, payable on May 15, 2024.

It pays an annual dividend of $1, which yields 8.96% on the prevailing price level. The REIT has raised its dividend payouts at a CAGR of 15.4% over the past three years.

On March 18, RITM announced the early tender results of its cash tender offer to purchase up to $275 million of its outstanding 6.250% Senior Unsecured Notes due 2025. As of the early tender deadline, $483,626,000 of the notes’ aggregate principal amount had been tendered. Due to exceeding the tender cap, RITM will accept notes for purchase on a prorated basis.

Moreover, the company’s approved new stock repurchase programs totaling $300 million, comprising a $200 million common stock repurchase program and a $100 million preferred stock repurchase program, effective until December 31, 2024.

During the fiscal year ended December 31, 2023, GLPI’s net servicing revenue stood at $1.29 billion. Its interest income grew 55.8% year-over-year to $1.68 billion. Net income attributable to common stockholders amounted to $532.68 million and $1.10 per share.

Analysts expect GLPI’s EPS for the fiscal first quarter (ending March 2024) to increase 12.2% year-over-year to $0.39, and its revenue is expected to grow 33% year-over-year to $1.04 billion. Moreover, the company has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.

Shares of RITM have soared 36.6% over the past year and 17.7% over the past six months, closing the last trading session at $10.93.

RITM’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

RITM has an A grade for Sentiment and a B for Value and Quality. It is ranked first in the same industry.

Beyond the POWR Ratings highlighted above, we have also rated RITM for Growth, Value, and Momentum. Get all the RITM ratings here.

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RITM shares were trading at $10.87 per share on Tuesday afternoon, down $0.06 (-0.55%). Year-to-date, RITM has gained 4.08%, versus a 9.23% rise in the benchmark S&P 500 index during the same period.


About the Author: Kritika Sarmah


Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...


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