10% Dividend Yield, Growth, Big Discount

What makes a 10% dividend yield better? The potential for growth. This is one mortgage REIT with the potential to increase dividends. That increase could come soon, or it could take a few quarters to play out. How often do I predict an increase for a 10% yield? It's extremely rare.A lower dividend is technically possible, but it’s a low probability. The deck is stacked in favor of more dividends.The high dividend yield comes from the discount to book. Yield on book is lower, so management has more assets to invest.Shares trade towards the lower end of the price-to-book ranges we’re seeing today, but they should trade near the top.

New Residential (NRZ) is now trading under a new name and ticker: Rithm Capital (RITM). We own shares of NRZ / RITM and shares of NRZ-D / RITM-D. Our positions in each share are greater than 5% of the total portfolio. That's greater than 10% combined. I believe we've got the analysis right and I put my money where my mouth is. NRZ’s Q2 2022 book value came in at $12.28. That’s down 2.2% from Q1 2022. It was a slightly larger decrease than The REIT Forum’s projection of $12.50, but that’s still close. Remember that many mortgage REITs are reporting huge swings in book value. Being within 2% this quarter is great.

Source: Seeking Alpha

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