When I was a young, the only Nerf's they had were footballs. Whoever was the brainchild at Nerf that parlayed that into Nerf guns and weapons better be a multi-millionaire. I have two young boys so I am familiar with their products. The Nerf weapons have become so popular, toy stores now have an entire aisle dedicated to Nerf's. Ah to be young again, the fun I could have with all of the Nerf products. That's ok because now as an adult, I get to own another NRF and earn an annual dividend yield of close to 10 percent on top of it.
NorthStar Realty Finance Corp (NRF), a commercial mortgage REIT, is a REIT that seems to be recovering. The company recently released their fourth quarter and full year 2011 results raising their quarterly dividend to $ 0.135 per share. Annualized that is $0.54 per share. The stock price recently closed at $5.54 which implies a 9.78% dividend yield.
REIT's are great stocks to own if you can catch them at the beginning of a new real estate cycle. A REIT is required to pay out 90% of their taxable income, as the company improves as a result of an improved economy, shareholders benefit with increased dividends. EPS estimates for NorthStar Realty Finance are for $1.36 this year and $1.47 in 2013. If NorthStar can hit their estimates, the annual dividend will go from $0.54 to a $1 or more.
On March 29, the Court of Appeal of the State of California reversed a judgment against NorthStar Realty Finance in a lawsuit with Washington Mutual Bank, ruling in the company's favor and reversing damages of $46million plus costs and legal fees of $6million, basically awarding NorthStar Realty Finance $52 million dollars. This is a substantial victory for NorthStar that REIT investors do not seem to have picked up on yet, as the stock price has barely budged since the news release. This news further validates the street estimates and they may need to be revised upward.
Commercial mortgage REITs seem to have turned the corner, data from the National Association of Realtors say vacancy rates are inching down, and rents are rising. Commercial real estate fundamentals improved during 2011, and during the first part of 2012, we've seen a rally in the CMBS market showing further market improvement.
If you want to enjoy a nice steady climb in share price while earning a dividend of 10% plus along the way, NorthStar Realty Finance Corp is a holding you should take a closer look at.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.