Income investors often have to make a decision whether they want to buy 1. Low-yield dividend stocks that have good prospects for dividend growth, or 2. High-yield dividend stocks that have limited dividend upside due to the fact that they are already required by law to pay out almost all of their earnings (REITs, BDCs). Excess dividend coverage and past dividend hikes suggest that this company may hand another raise to shareholders soon. Floating-rate loan portfolio provides operating earnings per-share upside in an environment of rising interest rates. An investment in the stock yields 10.77%.
Apollo Commercial Real Estate Finance (NYSE:ARI) is a high-quality income vehicle for dividend investors that has strong dividend coverage and operating earnings upside thanks to its largely floating-rate investment portfolio. Further, I think the company may soon hike its dividend. Apollo Commercial is a commercial real estate debt provider that invests in performing first mortgage loans, subordinate loans, CMBS, and other instruments. First mortgage loans and subordinate loans make up the majority (~86 percent) of the company's investment portfolio. The loans relate to commercial, cash-flow producing properties, and can either be floating-rate or fixed-rate.
Source: Seeking Alpha
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