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A little over a year back, I took a close look at the dividend safety of Arbor Realty Trust (NYSE: ABR) and rated it with a “B.” The primary concern at the time was a forecasted dip in net interest income for 2024. This figure is critical for assessing whether mortgage real estate investment trusts, or REITs, have the cash flow to sustain their dividend payouts.
Currently, Arbor Realty Trust boasts a hefty 14.4% yield. But the big question remains: Is this dividend still something investors can count on?
Indeed, net interest income took a hit in 2024, tumbling from $428 million down to $363 million. The good news? It’s projected to climb back up to $409 million this year.
Yet, a challenge has emerged. In 2024, Arbor shelled out $395 million to its shareholders. That’s a full 9% more than it actually earned, which means it distributed $1.09 in dividends for every $1 of net interest income.
As things stand, if Arbor moves forward with a predicted $435 million in dividend payments, the payout ratio is expected to surpass 100% again this year.
Historically, Arbor Realty Trust stopped its dividend during the global financial crisis, but since bringing it back in 2012, they’ve consistently increased it year after year—often more than once annually. This consistent bump in dividends over the last decade gives their dividend safety rating an extra boost.
Despite management’s apparent commitment to these dividends, maintaining payouts greater than net interest income will soon force the board to make some tough calls.
Given that both last year’s and this year’s payout ratios are anticipated to exceed the 100% mark, the security of Arbor Realty Trust’s dividend has come under increased scrutiny.
Dividend Safety Rating: C
Have a particular stock’s dividend safety rating on your mind? I’d love to hear about it—just let me know. Additionally, if you’re interested in previous analyses, simply head to the “Search” feature on the Wealthy Retirement homepage, type in the company of interest, and hit enter to see if we’ve covered it before.
And remember, Safety Net is designed for analyzing individual stocks, not exchange-traded funds, mutual funds, or closed-end funds.
