For over a decade, Arbor Realty Trust Inc. (ABR) was a standout dividend-growth finance REIT. From 2012 through the first quarter of 2025, the ABR dividend grew by 300%. It faced some issues in 2025, but I expect ABR to be the high-yield turnaround story of 2026, maintains Tim Plaehn, editor of The Dividend Hunter.
The Federal Reserve’s rapid increase in interest rates, starting in 2022 at near-zero percent and peaking at over 5% in 2023, was a severe jolt to Arbor Realty's business and to investors in ABR shares. Arbor Realty primarily provides financing for multi-family property investors. Loans on these types of property investments almost always have adjustable-rate interest rates.
As the Fed kept rates high for several years, the stress on the Arbor loans grew, forcing them to make modifications or even take back properties – real estate owned (REO). A large number of loans were placed in delinquent status.
After a long history of dividend growth with no reductions, the company had to slash the payout by 30% in May 2025. The current $0.30 dividend has been paid for three straight quarters. But now that interest rates are declining, Arbor Realty can be viewed as having two distinct business operations.
The current business lines, which include packaging loans for agency mortgage-backed securities, a bridge lending program, a single-family rentals lending program, and construction lending, are performing very well. The other side of the business is what Arbor management refers to as the legacy loan book, many of which are in trouble.
For the third quarter, the company reported delinquent assets of $750 million, up from $529 million at the end of the second quarter. The REO book was at $470 million at the end of the third quarter. This one-billion-plus of assets are not earning interest, and thus the source of the dividend cut a few quarters ago.
But the Arbor management team is accelerating the classification of loans as delinquent and the recovery of properties. Working through delinquent loans and REO will free up capital that is currently earning nothing. That capital will be added to equity to put to work in current business operations.
They also expect to continue paying the current ($0.30) dividend rate. ABR now yields over 13%. So, if you buy shares now, you'll receive an excellent yield, and there is a significant chance of substantial share price appreciation in 2026.
Recommended Action: Buy ABR.
