This 8% Yielder Could Be Worth Nearly Double

Rithm Capital (RITM), formerly New Residential Investments, has been in my Dividend Hunter portfolio since August 2014—eleven years now. A decade ago, the company was a straightforward finance real estate investment trust (REIT) with a unique portfolio of mortgage servicing rights (MSRs). Over the last six years, the company has evolved into a diversified alternative asset management firm, yet the market still values RITM as a finance REIT.

Before we dig into the current potential value for Rithm Capital, let’s look at a bit of history. Before the pandemic triggered a market crash, the company had steadily increased its quarterly dividend. With the massive uncertainty about business early in 2020, Rithm cut the dividend by 90%, to $0.05 per share. As the pandemic panic receded, Rithm steadily increased its dividend, reaching $0.25 per share by the fourth quarter of 2021. I know from communicating with my subscribers that investors would like to see Rithm Capital resume dividend growth.

Instead of distributing cash flow as dividends, the company has focused on buying companies to diversify the business. Here is a table of the current operating businesses.

In 2018, Rithm acquired Shellpoint Partners, a mortgage origination company, which was combined with the MSR portfolio to form Newrez, a full-service mortgage originating and servicing company. Newrez is a top-four originator and a top-three servicer in the U.S.

Rithm then acquired Genesis Capital in 2022, and Sculptor, a global asset manager,  in 2024. And,  in 2023, Rithm partnered with Darwin Homes to establish a single-family rental and build-to-rent management company.

Rithm Capital is now a diversified asset management and operating company; however, the market prices it like a REIT, with the RITM share price traded at just 95% of net asset value.

In its second-quarter earnings presentation, Rithm compiled a value comparison based on the price-to-book value of comparable companies.

If the investing public started to view Rithm as more than a finance REIT, the shares could be worth up to $22, compared to the current price of $12. I have long told subscribers that I believe RITM is worth at least $18 per share.

I know the Rithm management team is focused on finding ways to promote the real value of the company. In the meantime, I will be content earning an 8% yield while I wait.

This post originally appeared at Investors Alley.

Category: Dividend Stocks To Buy?, Dividend Yield