We recently compiled a list of the Dividend Contenders List: Top 15.In this article, we are going to take a look at where Arbor Realty Trust, Inc. (NYSE:ABR) stands against the other dividend contenders.
Dividend stocks have long been favored by investors for the income they generate, and they become even more appealing when dividends increase over time. Investors frequently seek out companies with a strong history of raising their dividends, as this growth boosts their income over the long term. Sustaining long-term dividend growth is challenging. For instance, "dividend aristocrats" are companies that have grown their dividends consistently for at least 25 years, and only about 68 US companies have been successful in achieving this. This demonstrates how difficult it is to attain such a high standard. However, many companies still manage to build shorter dividend growth histories, showcasing their resilience and potential to reach even greater milestones over time. Dividend contenders are well-regarded for having raised their dividends for 10 straight years, though they have yet to reach the 25-year mark needed to be considered long-term dividend growers.
Investors are drawn to dividend growth stocks, as these stocks have shown strong performance over the years. Data from Ned Davis Research covering the past 50 years revealed that high-quality companies that initiate and increase dividends have delivered higher returns and lower volatility than an equal-weighted index. By holding a portfolio of dividend growth stocks, investors can potentially achieve not only favorable risk-adjusted returns but also a more stable investment experience—one less impacted by the risks of market timing, which can reduce long-term gains. This strategy can help investors build wealth steadily over time, contributing to a more secure financial future.
Recently, tech stocks have surged to the forefront, and investors are capitalizing on this momentum, temporarily overshadowing dividend stocks. However, this shift doesn't imply a dim outlook for dividend stocks. Over the long term, dividend growth stocks have consistently demonstrated their strength and reliability. According to a report by Nuveen, companies that consistently grow or start paying dividends have delivered higher annualized returns with less volatility compared to other parts of the equity market. Although these dividend growth stocks don't outperform in every market condition, their solid risk-adjusted returns over extended periods make them a strong foundation for an equity portfolio.
Michael Clarfeld, manager of the Dividend Strategy portfolios at ClearBridge Investments, supports investing in dividend stocks. Clarfeld emphasizes the value of long-term compounding, viewing dividend stocks as essential for a well-rounded portfolio. He advocates for a dividend growth approach, focusing on companies capable of steadily increasing their dividends over time. Instead of chasing high yields for immediate gains, he advises investors to consider total return, which includes the reinvestment of dividends. In an interview with Morningstar, he noted that the average company in his portfolios has compounded dividends at around 9% annually, meaning an investor's income could potentially double every eight years. Clarfeld further said that dividend investing centers on evaluating a company’s cash flows and how they allocate payouts to investors.
In this dividend contenders list, we will take a look at companies that have raised their payouts for at least 10 consecutive years.
Our Methodology:
This list focuses on dividend contenders—companies known for raising their dividends consistently for 10 years but less than 25. From this group, we selected those with the highest dividend yields as of November 11, ranked from lowest to highest yield.
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) is an American real estate investment trust company that invests in a diversified portfolio of finance assets in the multifamily and commercial real estate markets. Earlier this year, the company encountered challenges as federal prosecutors and the FBI launched an investigation into its commercial mortgage REIT. The investigation is centered on the company’s lending practices and the accuracy of claims about the performance of its loan portfolio. In response, the company emphasized its commitment to cooperating with regulatory inquiries and expressed confidence in its compliance with proper standards. Since the start of 2024, the stock has surged by over 4%.
Arbor Realty Trust, Inc. (NYSE:ABR) reported mixed earnings in the third quarter of 2024. Its revenue of $88.8 million fell by 17.2% from the same period last year. However, the revenue beat analysts' expectations by $3.10 million. The company had approximately $600 million in cash and liquidity at the end of the quarter. Its cash position is also stable as its trailing twelve-month operating cash flow stands at $492 million.
Arbor Realty Trust, Inc. (NYSE:ABR) is an established player in the industry, having been in operation since 2003. Over the years, it has navigated significant economic challenges, including the Great Financial Crisis, the 2020 pandemic, and the post-inflation surge and Federal Reserve rate hikes in 2023. The company offers a quarterly dividend of $0.43 per share, translating to a dividend yield of 11%, as of November 11. With a track record of increasing dividends for the past 11 years, ABR stands out as one of the top dividend stocks on our dividend contenders list.
Overall ABR ranks 2nd on our list of the top dividend contenders. While we acknowledge the potential of ABR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ABR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
