I added Arbor Realty Trust Inc. (ABR) as a recommended stock in October 2017. Back then, it was a small-cap, $500 million market cap company; it has since grown into a $2.8 billion market value finance REIT, explains income expert Tim Plaehn, editor of The Dividend Hunter.
The company is a commercial mortgage lender focused on making multi-family residential property senior loans. Arbor Realty is a leader in its apartment properties commercial mortgage niche, and unlike a lot of finance REITs, the company is on an excellent growth trajectory.
Arbor Realty divides company operations into two sectors. For the balance sheet loans and structured investments, the company primarily originates or invests in multi-family secured loans. 95% of the investment portfolio is in bridge loans, with 89% of the bridge loans to multi-family properties. The average loan size is small, at approximately $19.3 million, giving an average loan-to-value of 77%.
In July 2016, Arbor Realty purchased the agency platform of Arbor Commercial Mortgage, LLC. This move pulled the servicing revenue of originated agency mortgages into the REIT. Arbor Realty now owns the servicing business on a $26 billion portfolio of multi-family mortgages.
The acquisition also turned the REIT into a fully integrated lending franchise with a significant agency origination business with high barriers to entry. Servicing revenues are reliable and growing.
Arbor Realty is a growth-focused business with a high current yield and growing dividends. The company increased its dividend to $0.37 per share — its seventh consecutive increase. Since early 2020, Arbor Realty has grown its dividend by 57%. The investment yields 8.5%.
Arbor Realty Trust is a great company, an outstanding dividend growth stock with a great yield, operating in the rapidly growing multi-family housing market. (Disclosure: Editor Tim Plaehn holds a personal long position in ABR.)
