Stubbornly High Mortgage Rates Benefit This 8.5% Dividend Stock

Core Insights - The article discusses the impact of mortgage refinancing activity on Rithm Capital (RITM), highlighting that a slowdown in refinancing is beneficial for the company due to its significant holdings in mortgage service rights (MSRs) [3][6]. Company Overview - Rithm Capital has strategically acquired a large stockpile of MSRs, which increase in value as interest rates stabilize or rise [3][6]. - The company recently raised its dividend by 25%, increasing the yield-on-cost from 7.6% to 9.5%, reflecting strong income growth [7]. Financial Performance - RITM reported earnings of $0.60 per share in its most recent quarter, surpassing Wall Street's expectations of$0.44, indicating robust financial health [9]. - The company has provided substantial cash dividends, totaling $3.25 on a purchase price of$10.46, resulting in a total return of 48% over 3.5 years [7]. Market Conditions - Current mortgage rates remain high, above 6%, contributing to a stagnant housing market and reduced mortgage activity, which is favorable for RITM [8]. - The acquisition of Sculptor Asset Management, which manages $34 billion in assets, adds a new revenue stream through fees, enhancing RITM's financial position [9]. Investor Sentiment - Hedge funds have begun to recognize the value of RITM's dividend offerings, adding 2 million shares in the latest quarter, indicating strong institutional interest [10].