Northstar Realty Finance Corp. (NRF) specializes in real estate, and is set up as a real estate investment trust that enables it to offer a very generous dividend to shareholders. The company uses leverage and invests in real estate securities, commercial loans, etc. It also conducts asset management, and other related activities. Other well-known companies that invest in real estate securities and offer a high-yielding dividend to investors include American Capital Agency (AGNC), which yields around 14%. While Northstar yields a bit less, it could make sense in terms of portfolio diversification and upside potential. Here are a few reasons to consider NorthStar shares, especially on dips:
1) Northstar has an experienced management team. It is led by CEO David Hamamoto. He co-founded NorthStar Capital in July 1997, having co-founded and previously been a partner and co-head of the "Real Estate Principal Investment Area" at Goldman Sachs (GS). He also serves as Chairman of the Board at Morgans Hotel Group Co. (MHGC). Northstar CFO, Debra Hess, also held high-level positions at top companies, which includes serving as managing director at Fortress Investment Group (FIG), CFO at Newcastle Investment Group (NCT), and various positions at Goldman Sachs.
2) NorthStar recently raised the dividend to 16 cents per share, which represents a 60% increase, and management seems to have a positive outlook on future financial results. The CEO recently stated:
"Throughout the year we have been deploying capital into new investments which increased cash flow to NorthStar and created long-term value for our shareholders. We continue to have a robust pipeline of exciting investment opportunities and are pleased to have declared another increase to our common dividend this quarter, representing a 60% increase over the last year."
3) This stock has been trending up and it has risen from about $5 per share in June, to around $5.60 currently. However, the stock still looks undervalued and it trades below book value, which is $6.21 per share.
4) Even though NorthStar shares have been rising and now trade near 52-week highs, insiders appear to see additional upside potential. On August 9, 2012, Butcher C. Preston, a director, purchased 20,000 shares for a transaction valued at about $110,000. This follows up another buy he made in June, of about 20,000 shares, in a transaction valued at about $101,000. Another director, W.D. Minami, purchased 15,000 shares in May, in a transaction worth around $83,000.
This stock appears to have support at about $5.30 per share, so patient investors should try to buy on dips at that level.
Here are some key points for NRF:
- Current share price: $5.61
- The 52 week range is $2.92 to $5.96
- Earnings estimates for 2012: $1.16 per share
- Earnings estimates for 2013: $1.29 per share
- Annual dividend: 64 cents per share, which yields 11.5%
Data is sourced from Yahoo Finance.
Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
