On Friday I purchased 200 shares of Starwood Property Trust Inc (NYSE: STWD) stock at $24.24 per share, totaling $4,848. This purchase will add $384 dollars to my annual dividend income. This purchase represents my first REIT purchase since selling out my positions with Realty Income Corp and Digital Realty Trust. REITs are attractive to me because of their high dividend yield. I must admit I was a bit gun-shy after getting burned by ARCP, but I feel that Starwood is positioned well for growth. STWD is now the largest REIT position I own in my Investment Hunting portfolio. This is the fifth purchase I have made with my 401k and Roth 401k rollover funds; I have also recently purchased Philip Morris, Aflac, AT&T, and MetLife.
I made an additional 3 purchases totaling roughly 25% of my rollover amount. My remaining funds will be added back to the market over the next 6 to 9 months. Please look for additional posts on each purchase next week.
An Overview of Starwood
Starwood Property Trust, Inc. is a holding company. STWD is focused on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities, and other commercial real estate-related debt investments in the United States and Europe.
Starwood Metrics and Valuation
Dividend Growth Rate And Yield
- 3-Year Dividend Growth Rate of 3.3%
- Annual Dividend Yield of 7.83%
- 5-Year Dividend Per Share Average of $1.71
- 5-Year Dividend Yield Average of 6.05%
The chart below shows STWD has had minimal dividend increases with one year of decline over the past six-years.
Is Starwood Stock Fairly Priced
STWD is currently trading at a P/E ratio of 11.3, which is slightly lower than the average P/E the market has traditionally values the company at. F.A.S.T graphs shows that STWD is trading just under its normal market P/E Ratio.
Starwood appears to be fairly valued, not a deal but not overvalued.
Starwood Earnings Per Share and Sales Growth
- 1-year EPS Growth of 17.71%
- 1-year Sales Growth of 27.91%
- 5-year Sales Growth of 12.54%
Other Key Metrics
- Dividend Payout Ratio — 85.48%
- Gross Profit Margin — 60.33%
- Operating Profit Margin — 30.88%
- Net Profit Margin — 71.43%
- Cash Flow Per Share — $2.32
- Cash Per Share — $1.14
Starwood Risks
All investing comes with risk. The obvious risk with REIT investing is rising interest rates. Starwood is not immune to this risk, however the company is also a lender, so rising rates leads to rising income. This is a moat of sorts; STWD will lose money on one side and make money on the other side.
What is you opinion of the Starwood? Do you think STWD stock will maintain its price if interest rate rise?
Full Disclosure: Long STWD