Starwood Property Trust Inc. (STWD) has earned its place as my conservative pick for 2026 because it does something very few mortgage REITs manage to do year after year. It survives every credit cycle with its dividend intact and its book value reasonably stable, observes Tim Melvin, editor of The Flagship Report.
The firm is the largest commercial mortgage REIT in the country – and is backed by the full weight of Barry Sternlicht’s real estate machine. That matters in a market where capital is scarce, underwriting discipline is inconsistent, and too many lenders are discovering that what looked like prime office or multifamily exposure a few years ago is a very different animal today.
The attraction here is simple. The stock recently featured an attractive dividend yield of over 10%, one that remains well covered by distributable earnings from a diversified platform. Starwood is not a one-trick mortgage REIT. It operates four businesses that collectively dull the impact of market swings.
The commercial lending segment is still the core. But the infrastructure lending arm, the property portfolio, and the special servicing operation give it stabilizing income streams that most peers cannot match.
When markets seize, special servicing gets busy. When credit spreads widen, commercial loan originations get more lucrative. When distressed opportunities arise, the property segment puts capital to work at prices that set up excellent long-term returns.
Starwood entered the current environment with conservative loan to value ratios and a defensive tilt. The company has been migrating away from challenged office assets and toward better performing industrial, multifamily, and specialty properties.
The average loan to value in the lending book sits at a level that provides substantial cushion even if property prices soften again in 2026. The balance sheet is also sound, liquidity is ample, and management has been proactive about extending debt maturities and protecting the dividend.
The opportunity in 2026 is straightforward. Commercial real estate is still in the repair stage of the cycle and capital remains tight. That environment rewards lenders who have experience, scale, and discipline. Starwood is one of the few platforms that can price risk correctly and collect attractive spreads without compromising credit quality.
Recommended Action: Buy STWD.
