Arbor Realty Trust: Steer Clear Of The Common, Eye The Preferred Instead

Binary Tree Analytics 5.84K Followers Follow Summary Arbor Realty Trust faces severe pressure from higher rates, with its common equity trading far below reported book value. ABR's profitability is declining due to increased REO, impairments, and credit loss provisions, making the current dividend unsustainable and likely to be cut. The market's skepticism is reflected in a 24% short interest and a payout ratio above 100%, signaling further downside for ABR common equity. We favor ABR's preferred shares, particularly ABR.PR.D, offering a 10% yield and superior risk/reward, as bond markets still view ABR as solvent. Tony Anderson/DigitalVision via Getty Images Thesis As we are writing this article, the 10-year rate is making new highs, almost touching 5%: The last time we were at 5%? June 2007. Higher rates are here to stay, and one significant implication has This article was written by Binary Tree Analytics 5.84K Followers Follow With a banking trading background, Binary Tree Analytics ('BTA') aims to provide transparency and analytics in respect to capital markets instruments and trades. BTA focuses on CEFs, ETFs and Special Situations, and aims to deliver high annualized returns with a low volatility profile. We have been investing for 20 years after obtaining a Finance major at a top university. Analyst’s Disclosure: I/we have a beneficial long position in the shares of ABR.PR.D either through stock ownership, options, or other derivatives. 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. 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.