Starwood Property Trust, Inc. (STWD) shares dipped after the company announced it was selling about 16 million new shares in an offering that would raise around $368 million. However, the stock has been in a solid uptrend and that is not likely to change. That's one reason why buying shares on a recent pullback from over $24 to around $23 per share is worth considering.
In order to take advantage of the strong demand for dividend stocks, many real estate investment trust companies have been raising capital recently. For example, American Capital Agency Corp (AGNC), which is a mortgage real estate investment trust, did a secondary offering in July, 2012. Even though the shares also experienced a pullback after the announcement, the stock went on to make new 52-week highs, within just weeks.
Starwood plans to use the funds to purchase additional commercial mortgage loans, make other investments, and possibly use some proceeds for other general corporate purposes. This is in line with why many other companies have raised funds and just like many stocks that have dipped after a capital raise was announced, it looks like Starwood shares will be poised to resume its uptrend soon.
Starwood is a leading provider of financing for commercial loans which are made on a wide variety of commercial properties like hotels, shopping centers, and other commercial spaces. It uses its special status as a real estate investment trust to offer shareholders with above-average yields that are very attractive. Starwood is led by Barry S. Sternlicht, who is Chairman and CEO. He is an experienced executive in this industry who also founded and served as Chairman of Starwood Hotels & Resorts Worldwide, Inc., (HOT), from September 1997 to May 2005. Starwood Hotels experienced solid growth and owns properties such as: W Hotels, Sheraton, Westin, Le Meridien and Four Points by Sheraton.
With many high-yielding dividend stocks trading at or near 52-week highs, buying on pullbacks has become a smart strategy for income investors, especially when the pullback is based on a secondary offering that will provide the company with funds to expand.
Here are some key points for STWD:
- Current share price: $23.25
- The 52 week range is $16.65 to $24.56
- Earnings estimates for 2012: n/a on Yahoo Finance
- Earnings estimates for 2013: n/a on Yahoo Finance
- Annual dividend: $1.76 per share which yields nearly 7.5%
Data is sourced from Yahoo Finance. 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
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.