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 (NASDAQ: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 (NYSE:GS). He also serves as Chairman of the Board at Morgans Hotel Group Co. (NASDAQ:MHGC). Northstar CFO, Debra Hess, also held high-level positions at top companies, which includes serving as managing director at Fortress Investment Group (NYSE: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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.