RWT - Redwood Trust: Why The 10.3% Yielding Preferreds Should Be Considered

2024-04-15 14:58:25 ET

Summary

• Redwood Trust is paying out an 11.2% dividend yield to its common shareholders that's not currently being covered by earnings available for distribution.
• The mREIT has seen its book value decline by 28% over the last 3 years.
• The preferred shares offer a double-digit yield on cost and are trading for a small discount to their liquidation value.

Redwood Trust ( RWT ) Series A preferreds offer a relatively low-risk source of a well-covered double-digit dividend yield. The internally managed mortgage REIT focuses on several distinct tranches of housing credit, operating in three segments; Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking, and Investment Portfolio. RWT's mortgage banking segments generate income from the origination and adjacent securitization or sale of these loans. The mREIT's investment portfolio is constituted of investments sourced from their mortgage banking and third parties. Critically, the commons have realized a sustained dip since the Fed embarked on a still ongoing battle to get inflation back to its 2% target. They're down 44% over the last 3 years....

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