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Lightening Up On My Arbor Realty Position

Crunching Numbers profile picture
Crunching Numbers


  • Arbor Realty still has an attractive forward dividend yield, although it is no longer above 8%.
  • The dividend is likely to be increased at least twice in the next year.
  • The sharp move higher in the past month is a reason to reduce my rating from Very Bullish to Bullish.
  • The move higher has also thrown my portfolio out of balance and I will be selling some of our shares.

Wood Building frame at Multi-Family Housing Construction
Photo by photovs/iStock via Getty Images

I still like Arbor Realty (NYSE:ABR). In fact, while I still like it a lot, I currently find it less attractive than I did back on April 10th when I rated

This article was written by

Crunching Numbers profile picture
As of May 13, 2022, ranked #95 out of 10,688 Bloggers (top 1%) by TipRanks and #392 out of 18,543 (top 2%) overall experts by TipRanks.com.https://www.tipranks.com/bloggers/crunching-numbersFocus is mostly on Sirius XM Holdings and income investing,  I have 30 years (through 2000) experience working for basic manufacturing and high tech industries in both the US and Europe. Company sizes ranged from start-ups to Fortune top 10. Experience as manager and/or grunt in fields of financial analysis, revenue forecasting, business planning, budgeting, pricing analysis, compensation planning, contracts, marketing and product management. Have been investing in stocks nearly 50 years, options for 30 years and on and off in real estate since 1981. Laid off when the dot-com bubble burst, and began investing full time.BS in engineering from Boston U, MBA in finance from Rutgers.

Analyst’s Disclosure: I am/we are long ABR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have included a detailed disclosure section in the body of the article that should be read carefully.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (30)

Jcb331 profile picture
Back up to $18 today and Raymond James raises price target to $20.
gcameron profile picture
Does not look very smart at all after today!
Crunching Numbers profile picture
@gcameron -

Who doesn't look very smart after today, and why?
Hard to second guess any decision to take profit.
@Sam_12 that is true, but if you invest for retirement income, then the question is finding a replacement that is as safe and steady as ABR. I think it depends on your investing goals.
Crunching Numbers profile picture
@Sam_12 -

I agree. One of my favorite investment quotes by Bernard Baruch: "I never lost money turning a profit."
Crunching Numbers profile picture
@RealRural -

"if you invest for retirement income, then the question is finding a replacement that is as safe and steady as ABR."

Egotist that I am, I'm guessing - like the Carly Simon song - that this is about me. First, we probably have enough money to live very comfortably - even luxuriously - for the rest of our lives. Then again, our needs aren't particularly great.

" I think it depends on your investing goals."

Exactly! sooo... Second, I'm starting to think more about estate planning and how to structure a will that takes care of our adult kids and grandkids and leaves a nice chunk to charities. Having a principle residence that has quadrupled in value is part of it, even if that residence is likely to be leveled. ;-)

What I'm trying to convey is that I don't "need" something to "replace" $ABR as either an income stock or a growth stock. I enjoy writing for SA, I enjoy trading and I especially enjoy picking winners. But all of this is really beyond the basic scope of the article, isn't it?
OOPS! ABR just raised their div from .33 to .34, a 3.5% increase, announced today I believe.
Crunching Numbers profile picture
@bull_rider -

Yes, they did, and it isn't much of a surprise. And, as I noted in the article:

"Not only do I expect at least two dividend increases in calendar 2021,..."
"...the recent 7.4% yield remains relatively attractive, and two events earlier this year should provide the company with sufficient capital to power more dividend increases. "
ABR’s earnings release today is a home run and shows its niche is in no danger of slowing down any time soon. Curious whether Crunching Numbers wants to reconsider and let winners keep running?
Crunching Numbers profile picture
@RealRural -

"Curious whether Crunching Numbers wants to reconsider and let winners keep running?"

The issue is whether the growth of $ABR exceeds the growth rate of the rest of our holdings, but the general answer is no. In fact I also sold out of two short term trading positions this morning. Part of the situation is that I manage a total of fifteen accounts for various family members, and not all have the same objectives and time horizons.

Some of these accounts are highly concentrated, and there are too many good opportunities to risk putting all of the eggs in a single basket.
@Crunching Numbers Lordy.
15 accounts would make my head explode! “Now is aunt Minerva the one who wants 5% in Bitcoin, or cousin Alphonse? Where’s my Excel spreadsheet....
Crunching Numbers profile picture
@RealRural -

It's not nearly as difficult as you might imagine. Although, in the past, I managed accounts for my parents and Aunt (all of whom died years ago), now its simpler with accounts for my adult children, myself and my wife. What makes the number of accounts grow are the various types of accounts, including margin, traditional IRA's, Roth IRA's, Inherited IRA's, Roth Conversion IRA's, Rollover IRA's, etc.

I never had to track the stuff on Excel spreadsheets since I had online and paper access to all accounts. That said, when I did some speculative trading in UQM Technologies for one daughter who wanted a clean energy stock, I used it to track the trading history. Had a lot of fun with that speculative investment, tripling her money between 2014 and 2018 , culminating with a buyout. Still searching for another one of those ESG winners.

You might find this blog that I wrote amusing - or tragic - and I never got around to finishing part 2.
I sold ABR once for a nice profit last summer and it kept going up. Won't make that mistake again. Long ABR and its great niche and management.
Crunching Numbers profile picture
@RealRural -

"I sold ABR once for a nice profit..."

The question is where did you put the proceeds? As I noted in the article, I have a core position, but I also actively buy and sell this stock frequently, I have done very well with the trades (in total, it's been far better than my buy and hold positions). The question is what did you do with the proceeds?
chris.strickland profile picture
I am have trimming on the way up. I’m up over 100%. Those profits are earning nothing. This is a wonderful REIT, one of my fully paid for stocks.
Crunching Numbers profile picture
@chris.strickland -

"This is a wonderful REIT,..."

Congrats on a timely purchase. Just be thankful you didn't make your first purchase when I did. In 2007 I bought 83 shares in my daughter's account at $16.52. The dividend would disappear and the price would drop below a buck when the housing bubble and Great Recession hit, but constant reinvesting of the dividends have resulted in the position growing to $4,154.22 - a "gain" of 190%. Not my best investment when measured by the CAGR...

This is the same management although the business has changed a bit, but timing of entry into, and exit from, a position can affect one's view of performance.

Thnks for the comment.
@Crunching Numbers
190% increase in 14 years averaged to more than 10% per year. Honestly...I’ll take that.

I’ve been in the markets for 40 years and I still laugh when reading the mavens going “in and out” of these stocks. Everyone remembers the ones they got right and forget the ones that ran away from them after they sold them.

Regarding it becoming “too much” of a portfolio, do you normally sell winners to buy or reallocate to potential losers?

I purchased this stock right after the mass decline in 2010. 5000 shares were bought at $2 per share. It is true, I bought an additional 2000 share over the years on dips, reinvested all dividends, and never sold a share. The value currently is $225,000. You really believe you did better than that by moving in and out of the stock and hope what you buy will do better? If you have a winner like this, sit back, relax, and enjoy the show
Crunching Numbers profile picture
@rsmab01 -

Thanks for the detailed reply.

"190% increase in 14 years averaged to more than 10% per year. "

Averages can be deceiving, especially when one considers compound interest. In my case, It was closer to 13.4 years than 14, and using monthly compounding, the CAGR is ~8.3%. That means I underperformed the S&P 500.

"I’ve been in the markets for 40 years and I still laugh when reading the mavens going “in and out” of these stocks. "

I'm getting close to the 50th anniversary of my first stock purchase, and I've been following the markets even longer.

"...do you normally sell winners to buy or reallocate to potential losers?"

Normally? No. And it's not a matter of keeping the same stocks and simply reallocating the dollars. I have somewhere around 70 stocks plus a couple of mutual funds. As I noted in the article, I don't want to have a single stock implode and cause significant damage to my portfolio, so I try to keep any single position to no more than ~5% of my equity positions. I currently have $AAPL, $ABR, $BGS (partly because I have a short term trading position with a covered call in addition to it being a core holding), $CAT, and $CMCSA that are each above 5%, although $AAPL and $BGS are the only ones above 6%.

And, no, I don't sell winners to "buy or reallocate to potential losers". I sell in order to diversify and reduce risk. If I don't have a stock that I want to add, I let it sit in cash, which BTW, is my second largest holding, with real estate being my largest.

"You really believe you did better than that by moving in and out of the stock and hope what you buy will do better? "

Congrats on your investment. As I noted in the article, I also do a lot of trading and I can't tell you whether or not I did better than you on any specific stock without both of us going into far more detail. Although, not that it matters, a quick look at my realized gain/loss summary on my brokerage accounts shows that I had six figure gains (realized gains) in 2019, 2020 and YTD 2021, but that's all stocks and options, not just $ABR. .

One last point of reference... If I also look at my YTD gains for 2021, along with my one year and two year gains for all accounts and all positions, I see the following percentages:

YTD 14.88%
1 year change 63.12% (distorted by the COVID-19 market melt down)
2 year change 48.68%
Veeon profile picture
Recent 175 Million debt offering signals to me that ABR continues to have opportunities to invest in for high returns and a dividend increased is to be expected at their next quarter's meeting, but prudence requires me to balance out a percentage as well
Crunching Numbers profile picture
@Veeon -

I agree, and relative to the 5% notes, as I wrote in the article, "If it made sense to issue shares with a dividend "cost" of more than 8%, it would seem likely that the new notes which cost 5% will generate even better returns."

Anyway, we'll know soon enough as the Q1 earnings and CC are tomorrow morning.

Thanks for the comment.
Thanks. I wanted to open a position.
Is the dividend safe enough?
Crunching Numbers profile picture
@Centrino -

You're welcome, and thanks for the question. I certainly think it is, and I would point to a number of factors (aside from cash flow statements)....

First, there is the number of times it has been increased over the past few years and the recent consecutive quarterly increases. Companies typically don't keep raising the dividend if it was going to be difficult to cover it.

Second, although this article doesn't mention Leon Cooperman as a shareholder, his success and congratulatory compliments to management on the conference calls suggest he is comfortable with the dividend coverage.

Third, the wisdom of the crowd and the stock market keeps pushing the price higher, This is not the typical behavior when a cut is on the horizon.
Crunching Numbers profile picture
@Centrino -

You're welcome. BTW - regarding dividend safety - the dividend was raised and information on the CC that took place this morning lends credence to the idea that it will be increased even more in the future. A while ago SA Contributor @brad Thomas wrote an article titled "Arbor Realty: The Safest Dividend Is The One That's Just Been Raised". I think that he's mostly correct, but would argue that the safest dividends are the ones that have just been paid or the ones that have just gone ex-dividend, ;-)
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