History of the Top Ten Investments

The last time I published a list of our investments was December 2019. Much has changed during 2020 and 2021 YTD. Because I sold most of our investment in AT&T this week, which had been in the top ten investments we hold, I thought now would be a good time to provide an update of the top ten, starting with number ten. Number 10 is ABR – Arbor Realty Trust, Inc.

NUMBER TEN: Our Current Ownership of ABR

Number 10 in the TOP TEN LIST IS ABR: Arbor Realty Trust

Cindie and I both have brokerage accounts, ROTH IRA’s and traditional IRA accounts. Therefore, it is possible we might hold the same investment in six different accounts. Because of this, we hold a total of 254 positions. This seems like a lot, but it is really because there are duplicates. In truth, we hold 141 unique positions, and most of them are long-term holdings. However, about 20 of the total are short-term investments. That means I might only hold them for a week, or a couple of months.

Cindie and I own a combined total of 3,500 shares of ABR in four accounts: ROTH and traditional IRA accounts. Of this total, I own 2,000 shares in my traditional IRA.

Why Does ABR Qualify for the TOP TEN?

First of all, it is a REIT. Even if a REIT doesn’t have a wonderful dividend growth story, I like investments in the REIT sector. ABR provides us with about $4,760 in annual income for our 3,500 shares. That is almost $400 per month. This will pay about half of our Fitchburg property taxes in 2021.

Pay attention to the payout ratio to ascertain the risk. Anything over 90% is questionable.

The P/E FWD is an acceptable 9.49 and the dividend yield is an amazing 7.65%. Of course, yield can be a phantom or an indicator that something is wrong. In the case of ABR, however, the dividend is increasing. The five-year dividend growth rate is 16% and the ten-year growth rate of the investment is 256%. The revenue growth (see below) is outstanding.

The revenue is growing and the dividend is growing.
ABR has great numbers. Those who sold in early 2020 were misguided.

ABR was a scary investment during Covid-19 in early 2020. The price of the shares dropped below $5. I did not sell. Instead, I bought more shares in March 2020. This is an ongoing strategy: buy low and then hold on and collect the dividends.

The Sector, Industry, Market Cap and Revenue Growth of ABR

Sector: Financials

Industry: Mortgage REITs

Market Cap: $2.68B

Revenue Growth (TTM vs Prior TTM)       +34.62%

ABR Equity Summary Score from Fidelity Investments

Company Profile

Arbor Realty Trust, Inc. invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States. The company operates in two segments, Structured Business and Agency Business. It primarily invests in real estate-related bridge and mezzanine loans, including junior participating interests in first mortgages, and preferred and direct equity, as well as real estate-related joint ventures, real estate-related notes, and various mortgage-related securities. The company offers bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property; financing by making preferred equity investments in entities that directly or indirectly own real property; mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction; junior participation financing in the form of a junior participating interest in the senior debt; and financing products to borrowers who are looking to acquire conventional, workforce, and affordable single-family housing. In addition, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2003 and is headquartered in Uniondale, New York.

Next time: Number NINE. Number nine is a BDC. A BDC is a Business Development Company. Stay tuned to learn more.