Like most high-yield income vehicles, this company has had a good run lately. Shares of the largest commercial mortgage REIT in the U.S. have risen ~23 percent in the last year as investors moved funds into interest rate-sensitive assets. Despite the increase in its valuation, I think the reward-to-risk combination still looks compelling here, largely because the REIT has excellent dividend coverage, interest rate upside (read: dividend upside) and is reasonably valued on a run-rate core earnings basis.
Starwood Property Trust, Inc. (NYSE:STWD) is a top shelf income vehicle with potential to grow its valuation and its dividend. For one thing, Starwood Property Trust has strong dividend coverage that protects shareholders' dividends. Further, the commercial mortgage real estate investment trust has earnings upside related to its floating rate loan investment portfolio that is likely to get a boost if the Federal Reserve pushes interest rates higher in 2017.
Source: Seeking Alpha
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