Starwood Property Trust (STWD) has been one of our portfolio stocks since our very first June 2014 issue; over the years, it has become our largest position, notes Tim Plaehn, editor of The Dividend Hunter.
The company has been a tremendously stable dividend payer, and it has been an outstanding stock to add shares during stock market corrections.
A finance REIT whose primary business is the origination of commercial property mortgages, Starwood is one of the largest players in the field, focused on making large loans with specialized terms. The scale gives the company a competitive advantage over banks and smaller commercial finance REITs.
In recent years, Starwood has acquired what is now the largest commercial mortgage servicing firm. Over the last few years, it has also acquired select real estate properties, including apartments, regular office buildings, and medical office campuses. Starwood also has invested in residential mortgage and infrastructure lending.
I view the Starwood dividend as one of the most secure in the high-yield stock space. Starwood Capital, a real estate-focused private equity company with over $60 billion of assets under management, manages the REIT.
Starwood Capital is a 2,200 person global organization, and Starwood Property Trust taps into that reach and expertise to find high-value commercial mortgage prospects and other investments.
Billionaire Barry Sternlicht, as CEO of both Starwood Capital and Starwood Property Trust, has often repeated his commitment to building STWD to sustain its dividend. Sternlicht and the upper management team own more than $100 million worth of STWD shares.
Historically, STWD has been priced to yield between 7.5% and 8.5%. An 8% yield equates to a $24.00 share price. Accumulating shares for less than $20 makes an attractive long-term investment.
Over the last almost-seven years, I have been buying STWD during market corrections and share price pullbacks. My average cost is under $17.00 per share. In addition to our model portfolio, I have a personal long position in the REIT.
I hope you think of STWD as a long-term investment — one with which you will be able to take advantage of opportunities to average down your cost and increase your dividend income stream.