We recently compiled a list of the 7 Dividend Stocks with 10%+ Yield. In this article, we are going to take a look at where Arbor Realty Trust, Inc. (NYSE:ABR) stands against the other dividend stocks with 10%+ yield.
Dividend stocks have kept their appeal among investors due to the steady yields and income they provide. However, in the past year or so, all eyes have been on anything related to artificial intelligence. These stocks have not only surged but have also lifted the overall market much higher compared to dividend-paying stocks. Nevertheless, tech stocks have also joined the dividend game, unable to resist the trend as several major companies began distributing dividends starting in 2024. This highlights the financial strength of these companies, as they generate more cash than they currently need to reinvest.
Despite the lower yields on these tech stocks, their dividend payouts are punching above their weight contributing to the overall payments made by companies in the broader market. According to a report by S&P Dow Jones Indices, in the second quarter of 2024, companies listed in the index collectively paid out $153.4 billion in dividends, marking an increase from $151.6 billion in the previous quarter and up from $143.2 billion in the same period last year. The report highlighted that Alphabet’s dividend initiation contributed $9.3 billion to the Q2 2024 increase, while initiations from Brookings, Meta Platforms, and Salesforce in Q1 2024 accounted for $7.2 billion, collectively making up 53% of the S&P 500’s year-to-date dividend gain. Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said that although the gains without the new initiations are expected to achieve a record dividend payment for 2024, their ongoing commitment to dividend payouts will notably boost the total payout, prompting investors and boards that do not currently pay dividends to reassess their strategies.
Dividend investors often debate between dividend yields and dividend growth, not fully realizing that dividend yield is crucial for sustained dividend growth. For instance, in the case of the Dividend Aristocrats Index, which has raised dividends for 25 consecutive years, maintaining a high yield hasn’t been at the expense of growth. Over the past 26 years ending in 2023, the index consistently outperformed its benchmark with higher yields, typically ranging between 2% and 2.9%. On average, the index boasted a yield of 2.5%, significantly higher than the market average of 1.8%, according to a report by S&P Dow Jones Indices. To learn more about high-yield stocks, read Very High Yield Dividend Stocks With Upside Potential.
However, it’s worth noting that high dividend yields aren’t always the most practical choice. Analysts generally suggest targeting dividend yields in the range of 3% to 6%, as this range typically offers potential for both dividend growth and appreciation in stock value. In one of its reports, an Illinois-based financial planning company, Nuveen, highlighted that global companies with moderate dividend yields (between 0% and 3%) tend to demonstrate stronger earnings growth, profitability, and profit margins compared to those with higher yields or those that don’t pay dividends at all. These factors also contribute to reducing risk, particularly during periods of market volatility.
The debate between these two strategies appears endless. We believe that combining growth and yields can present better results for investors. How investors navigate yield traps ultimately depends on their caution and strategy. With that, let’s take a look at some of the best dividend stocks with over 10% yield.
Our Methodology:
For this list, we used a stock screener and selected dividend stocks with yields above 10%, as of July 16. Among those stocks, we chose companies that have relatively stable dividend histories, however, a lot of the companies on the list don’t have a consistent record of paying dividends due to their exceptionally high yields. They either stopped or reduced their dividend payments in 2020 due to the pandemic or because they were facing financial difficulties. We’ve also mentioned the hedge fund sentiment for each stock using Insider Monkey’s Q1 2024 database. The stocks are ranked in ascending order of their dividend yields, as of July 16.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
Rows of neatly arranged, multi-family homes, symbolizing the company’s large-scale investing opportunities.
Arbor Realty Trust, Inc. (NYSE:ABR)
Dividend Yield as of July 16: 12.78%
Arbor Realty Trust, Inc. (NYSE:ABR) is a New York-based real estate investment trust company that invests in a diversified portfolio of finance assets in the multifamily and commercial real estate markets. On July 12, the stock experienced a sharp decline of 17% following reports that federal prosecutors and the FBI are investigating the commercial mortgage REIT. The investigation focuses on lending practices and the accuracy of claims regarding the performance of its loan portfolio. In response to the inquiries, the company stated that it regularly cooperates with regulatory investigations and maintains confidence in its adherence to proper conduct.
That said, analysts see an opportunity in Arbor Realty Trust, Inc. (NYSE:ABR) due to its highly secured dividend, supported by a near-impeccable payment history and strong liquidity position. In addition, the company’s extensive structured loan portfolio stands out as one of the largest among mortgage real estate investment trusts (mREITs), reaching a valuation of $12.25 billion by the close of its fiscal first quarter in 2024. During this period, the company originated $255.9 million in new structured loans, although it experienced a runoff of $640 million. This runoff has bolstered its balance sheet liquidity, resulting in cash and equivalents totaling $908 million by the end of the first quarter, marking its highest level in more than ten years.
Arbor Realty Trust, Inc. (NYSE:ABR) is not some newbie in the industry, in fact, it has been around since 2003 and has weathered significant economic challenges, including the Great Financial Crisis, the 2020 pandemic, and the post-inflation surge and Fed rate hikes in 2023. The company pays a quarterly dividend of $0.43 per share and has a dividend yield of 12.78%, as of July 16. It has been rewarding shareholders with growing dividends for the past 11 years, which makes ABR one of the best dividend stocks on our list.
The number of hedge funds tracked by Insider Monkey owning stakes in Arbor Realty Trust, Inc. (NYSE:ABR) jumped to 24 in Q1 2024, from 17 in the previous quarter. These stakes have a consolidated value of over $96.7 million. Among these hedge funds, Omega Advisors was the company’s largest stakeholder in Q1.
Overall ABR ranks 1st on our list of the best dividend stocks to buy with 10%+ yield. You can visit 7 Dividend Stocks with 10%+ Yield to see the other dividend stocks that are on hedge funds’ radar. While we acknowledge the potential of ABR as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is more promising than ABR but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.