7% High Yield Dividend From Rithm Capital Preferred Share

Core Viewpoint - The article discusses the investment potential of Rithm Capital Corp.'s preferred shares, particularly RITM-D, highlighting their attractive dividend yields and the likelihood of being called when the call protection period ends. Group 1: Investment Performance - RITM-D has shown strong performance with total returns ranging from 21.96% to 49.52% depending on the purchase date and share allocation [3][4][10] - The preferred shares currently offer a dividend yield of approximately 7.07% and a yield to call of about 8.3%, which was higher at around 9.5% earlier in the year [3][4] - The shares have been trading around $24.76, reflecting a 1% increase recently, which has impacted the yield to call significantly [10][11] Group 2: Call Risk and Strategy - There is a significant chance that RITM-D shares will be called when the call protection ends, with a projected increase in the dividend rate based on the five-year Treasury rate plus a spread of 6.223% [4][10] - The strategy suggests exiting the position if the worst cash-to-call falls to around negative $0.15, indicating a cautious approach to managing call risk [8] - The shares are viewed as moderately attractive for new investors, especially if the price declines by about 1.5%, which would enhance the yield to call [12] Group 3: Market Context and Comparisons - Rithm Capital has outperformed many peers in the mortgage REIT sector, particularly in protecting dividends and book value, leading to superior total returns [17] - The preferred shares have shown resilience, recovering from market volatility and maintaining steady returns despite fluctuations in Treasury rates [15][24] - The article emphasizes the importance of preferred shares and baby bonds in a diversified investment strategy due to their lower volatility compared to common equity [24]