{"id":87475,"date":"2023-11-22T09:21:27","date_gmt":"2023-11-22T14:21:27","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/ceo-makes-massive-purchase-of-this-13-dividend-stock\/"},"modified":"2023-11-22T09:21:29","modified_gmt":"2023-11-22T14:21:29","slug":"ceo-makes-massive-purchase-of-this-13-dividend-stock","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=87475","title":{"rendered":"CEO Makes Massive Purchase Of This 13% Dividend Stock"},"content":{"rendered":"
\n

A key insider has quietly snapped up 10,000 shares of his 13%-yielding stock. And we contrarian income seekers are putting the ticker on our buy list, too.<\/p>\n

That\u2019s because insider buying really is<\/em> the ultimate \u201cbuy alert.\u201d Legendary value investor Peter Lynch said it best:<\/p>\n

\u201cInsiders might sell their shares for any number of reasons, but they only buy for one: <\/em>they think the price will rise.\u201d<\/em><\/strong><\/p>\n

Heck, I can almost see my regular readers nodding along to this one. We\u2019ve talked about it again and again in my Contrarian Income Report <\/em>service. In fact, we\u2019d go one step further than Lynch:<\/p>\n

Insiders buy because <\/em>they think the dividend will rise<\/em><\/strong>, too. <\/em><\/p>\n

Which brings me to the news that crossed my desk last week: that Ivan Kaufman, who founded Arbor Realty Trust (ABR)<\/strong> 40 years ago, and is still CEO today, recently dropped $124,000 to pick up about 10,000 common shares of the stock.<\/p>\n

That brought his total direct holding in the real-estate lender to 1,033,412 common shares. With each of those shares dishing $0.43 in quarterly dividends, that amounts to a $444,000 payout every quarter.<\/em><\/p>\n

<\/fbs-ad><\/p>\n

Talk about living on dividends alone! Ivan has far more than enough for most of us to pull that off in one quarter\u2019s<\/em> worth of dividends\u2014from just one holding!<\/p>\n

So we won\u2019t expect to see Ivan on our CIR<\/em> subscriber list anytime soon. But those of us who aren\u2019t<\/em> CEOs of $2.6-billion companies can benefit by riding along with Ivan\u2019s latest buy.<\/p>\n

Because he knows what we know: Arbor\u2014a holding in our CIR<\/em> portfolio, is cheap.<\/em> And, of course, it yields that 13% I mentioned a second ago, too.<\/p>\n

And that 13% payout has been growing, too:<\/p>\n

When a divvy yields double digits and zooms up 231% in a decade, it has our attention. Especially when the share price and payout part company, as is clearly the case here. As we\u2019ve discussed previously, a rising dividend acts like a magnet on a company\u2019s share price. So when we see a gap between a stock and its \u201cDividend Magnet,\u201d we know it means \u201cbaked in\u201d upside for us.<\/p>\n

As the price gains, the current yield will fall, so if you want to make sure you\u2019re getting that 13% payout in full,<\/em> this is the time to buy and \u201clock in.\u201d<\/p>\n

A \u201cMislabeled\u201d Lender<\/h2>\n

Arbor is one of those companies that often gets tossed out because investors misunderstand its business: founder Kaufman set Arbor up as a lender for single-family mortgages. True to its name, Arbor sent every new homeowner a tree at loan closing!<\/p>\n

In the 1990s, Arbor expanded its lending to multifamily and commercial properties. It found a \u201csweet spot\u201d in loans between $1 million and $5 million\u2014too small for the big players, too big for the small players, but plenty profitable for Arbor.<\/p>\n

This was the first of many<\/em> smart business pivots for Arbor. Ivan is our type of entrepreneur. He\u2019s always looking ahead.<\/p>\n

Mortgage rates have pulled back a bit with bond yields, but they\u2019re still near 23-year highs. Fortunately, Arbor is long gone from the residential-lending business, having sold its residential operation to Bank of America
\n
\n BAC
\n <\/fbs-ticker> (BAC)<\/strong> in 1995. Today, it favors much more profitable multifamily lending.<\/p>\n

It\u2019s also diversified away from commercial real estate. Which, quite frankly, is the reason the stock is so cheap. \u201cGoing to the office\u201d will never be the same after COVID. But Arbor is lumped with commercial lenders and landlords\u2014ridiculous given that these loans make up just 1% of its overall portfolio:<\/p>\n

In the mid 2010s the company bought a commercial mortgage-lending agency and its in-house technology platform. It was another canny \u201cinsider\u201d move, as Arbor had spun off this business in 2004, so Ivan was already familiar with it.<\/p>\n

It was also a smart move because it created a new stream of loan-servicing income\u2014a steady, long-duration business. This grew to one-third of Arbor\u2019s total sales in just two years\u2014a diversified and<\/em> protected income stream!<\/p>\n

Today, Ivan refers to this as Arbor\u2019s service income annuity<\/em>. It amounts to about $240 million of annual profits, which equates to $1.20 per share.<\/p>\n

ABR\u2019s quarterly dividend is $0.43 per share. This annuity covers two-thirds of it off the bat<\/em>. Throw in the money it still makes lending and ABR has a comfortable, for a real estate investment trust (REIT), 78% payout ratio, based on its latest distributable earnings and quarterly payout.<\/p>\n

No wonder Ivan\u2019s buying now. Further payout growth would steadily build on the 13% \u201cstarter yield\u201d on a buy made now.<\/p>\n

Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A key insider has quietly snapped up 10,000 shares of his 13%-yielding stock. And we contrarian income seekers are putting the ticker on our buy list, too. That\u2019s because insider buying really is the ultimate \u201cbuy alert.\u201d Legendary value investor Peter Lynch said it best: \u201cInsiders might sell their shares for any number of reasons, […]<\/p>\n","protected":false},"author":1,"featured_media":87476,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-87475","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\nCEO Makes Massive Purchase Of This 13% Dividend Stock | iFintechWorld<\/title>\n<meta name=\"description\" content=\"A key insider has quietly snapped up 10,000 shares of his 13%-yielding stock. 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