After a couple of bad months in February and March, the Dividend Hunter recommended portfolio has performed exceptionally well. As I write this, the Stable Dividends category has a total return of almost 20% for the year, and the Variable Dividends category is up 12%. One company I (still) like is Rithm Capital (RITM), spells out Tim Plaehn, editor of The Dividend Hunter.
We continue to live and invest in a world with many financial uncertainties. The “experts” have backed off on a lot of their recession predictions—a fact that has my contrarian side a little worried. However, as I hope you know, the Dividend Hunter strategy lets us ride the ups-and-downs of the markets and the economy, continuously growing our portfolio income.
RITM continues to make the cut because it continues to diversify its business, striving to generate numerous revenue streams. When I added Rithm Capital to the Dividend Hunter portfolio in August 2014, the company operated primarily as an investment firm, managing a portfolio of real estate-related securities. Over the years, the company grew by acquiring operating companies in the mortgage space. Rithm is organized as an REIT.
Here is a list of Rithm’s currently owned operating companies and the types of investments and services.
The pandemic-triggered shutdown and subsequent sell-off of high-yield securities hit Rithm Capital (then called New Residential Investment) especially hard. The company slashed its dividend by 90%, going from $0.50 per share to $0.05.
Then in June 2022, the company rebranded itself, taking its current Rithm Capital name. The change indicated the business’s expansion to drive growth through a managed private capital arm. By the 2023 first quarter, there had not been much news about the business expansion. That changed in July 2023.
On July 20, Rithm Capital announced it had purchased a $1.4 billion consumer loan portfolio from Goldman Sachs Group (GS). The pool is comprised of 100% fixed-rate, closed-end installment loans.
On July 24, Rithm Capital also announced it had agreed to acquire Sculptor Capital Management (SCU) for $639 million, or $11.15 per share. Sculptor is an alternative asset manager with $34B in assets under management.
Distributable net income has varied over the last two years. The company reported $0.44 per share for the 2021 third quarter. Three quarters later (Q2 2022), it was at $0.31. Earnings have risen slowly since then, with a reported $0.35 per share for the 2023 first quarter and a Wall Street estimate of $0.35 for the second quarter.
We may not see another dividend increase until late 2024 or early 2025. But in the meantime, the current 10% yield makes it worth the wait.
Recommended Action: Buy RITM