In December 2017, I looked at the dividend safety of Apollo Commercial Real Estate (NYSE: ARI).
Back then, SafetyNet Pro and I determined that the 9.8% yield was safe. The stock received an “A” rating because the company generated plenty of net interest income (NII).
A reader requested that I revisit Apollo Commercial Real Estate, his interest likely sparked by my recent recommendation of the stock in the July issue of The Oxford Income Letter.
Apollo Commercial Real Estate is a mortgage real estate investment trust (REIT). It borrows money short term and lends it out longer term at higher rates. The difference between the two, minus expenses, is NII.
NII is the measure of cash flow that we use to determine if a mortgage REIT can afford its dividend.
Apollo’s NII has been moving straight up.
In 2014, Apollo’s NII was just $97 million. It climbed all the way up to $289 million last year and is forecast to soar to $342 million in 2019.
The rising NII has made it easy for Apollo to pay its dividend. Last year, it paid out $254 million to shareholders.
The company has paid a dividend since 2010. It has never been cut.
While Apollo Commercial Real Estate is not a Perpetual Dividend Raiser (it has raised the dividend three times in nine years, the last time in 2015), I wouldn’t be surprised if management lifts the dividend again in the near future.
What would shock me is a dividend reduction.
Apollo Commercial Real Estate is growing its cash flow, pays out less cash in dividends than it brings in and has a strong dividend-paying track record.
Out of nearly 800 stocks, Apollo Commercial Real Estate is the only double-digit-yielding stock rated “A” by SafetyNet Pro.
Dividend Safety Rating: A
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[adzerk-get-ad zone="245143" size="4"]About Marc Lichtenfeld
Marc Lichtenfeld is the Chief Income Strategist of Investment U’s publisher, The Oxford Club. He has more than three decades of experience in the market and a dedicated following of more than 500,000 investors.
After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc’s commentary has appeared in The Wall Street Journal, Barron’s and U.S. News & World Report, among other outlets. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer’s TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance.
Marc shares his financial advice via The Oxford Club’s free daily e-letter called Wealthy Retirement and a monthly, income-focused newsletter called The Oxford Income Letter. He also runs four subscription-based trading services: Technical Pattern Profits, Lightning Trend Trader, Oxford Bond Advantage and Predictive Profits.
His first book, Get Rich with Dividends: A Proven System for Earning Double-Digit Returns, achieved bestseller status shortly after its release in 2012, and the second edition was named the 2018 Book of the Year by the Institute for Financial Literacy. It has been published in four languages. In early 2018, Marc released his second book, You Don’t Have to Drive an Uber in Retirement: How to Maintain Your Lifestyle without Getting a Job or Cutting Corners, which hit No. 1 on Amazon’s bestseller list. It was named the 2019 Book of the Year by the Institute for Financial Literacy.
