This 7.9%-Yielding Real Estate Finance Company Is A Strong Buy

Blackstone Mortgage Trust (BXMT) is a elite income car to reason during a rising rate environment. The genuine estate financial association advantages from clever fad growth, and it has built a vast floating-rate loan portfolio that is staid to chuck off aloft net seductiveness income during a tide rate hiking cycle. Blackstone Mortgage Trust simply earns a dividend, and a division travel in 2018 is wholly within a realms of possibility. An investment in Blackstone Mortgage Trust comes with a division produce of 7.9 percent.

Blackstone Mortgage Trust’s shares have rebounded tough and quick from a batch marketplace sell-off in February. Shares are no longer oversold according to a Relative Strength Index.

Source: StockCharts

Strong Origination Growth

The blurb genuine estate marketplace in a United States is in good shape, and Blackstone Mortgage Trust continues to issue new loans during a quick clip. The good news is that new originations are 100 percent floating-rate comparison loans, sourroundings Blackstone Mortgage Trust adult for aloft net seductiveness income in a rising rate environment.

Blackstone Mortgage Trust’s loan originations strike $4.8 billion in 2017, reflecting 37 percent year-over-year growth.

Source: Blackstone Mortgage Trust Investor Presentation

Blackstone Mortgage Trust originated $1.2 billion in new loans in a final entertain of 2017. Here’s an overview of Blackstone Mortgage Trust’s quarterly loan originations (100% senior, floating-rate):

Source: Achilles Research

Blackstone Mortgage Trust’s high thoroughness of floating-rate loans sets a association adult for core gain expansion as prolonged as a Federal Reserves keeps lifting seductiveness rates. A whopping 94 percent of Blackstone Mortgage Trust’s investment portfolio is now tied to non-static rates.

Management expects that a one percent boost in USD LIBOR will outcome in additional net seductiveness income of $0.29/share annually. The aloft seductiveness rates climb, a stronger net seductiveness income tailwinds will be.

Source: Blackstone Mortgage Trust

Solid Dividend Coverage Stats

Not usually does an investment in Blackstone Mortgage Trust come with core gain upside, though a division could also get a boost. Currently, a genuine estate financial association pays shareholders a prosaic $0.62/share quarterly, though a division boost is positively in a cards in 2018 if a company’s net seductiveness income gets a lift.

Blackstone Mortgage Trust already overearns a division with core earnings, on average.

Here are Blackstone Mortgage Trust’s division coverage stats, updated for a recently expelled fourth entertain core earnings.

Source: Achilles Research

Blackstone’s division coverage ratio has averaged ~103 percent in a final 4 quarters, and ~106 percent in a final 10 quarters.

Source: Achilles Research

Worth Buying Today?

Blackstone Mortgage Trust’s division tide costs income investors ~12.0x Q4-2017 run-rate core earnings. Considering that BXMT retains core gain and division upside in a rising rate environment, we cruise this to be a satisfactory cost to pay.

Your Takeaway

Blackstone Mortgage Trust is a earnest income car for a tide rate tightening cycle: The genuine estate financial association has built a vast portfolio of floating-rate resources and a fad business is doing unequivocally well. As prolonged as a blurb genuine estate marketplace stays in shape, Blackstone Mortgage Trust stays a decent income play. Shares are pretty priced, and a division is lonesome by core earnings. 2018 could even see a division travel if a Federal Reserve pushes rates higher. Buy for income and collateral appreciation.

If we like to review some-more of my articles, and like to be kept adult to date with a companies we cover, we pleasantly ask we that we corkscrew to a tip of this page and click ‘follow‘. we am mostly investing in division profitable stocks, though also try out spasmodic and cover special situations that offer appealing reward-to-risk ratios and have intensity for poignant collateral appreciation. Above all, my evident investment idea is to grasp financial independence.

Disclosure: I am/we are prolonged BXMT.

I wrote this essay myself, and it expresses my possess opinions. we am not receiving remuneration for it (other than from Seeking Alpha). we have no business attribute with any association whose batch is mentioned in this article.

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