Shuo Guo/iStock via Getty Images
Starwood Property Trust (NYSE:STWD) has maintained its quarterly cash dividend distribution at $0.48 per share for nearly a decade. This consistent distribution has endured through various economic and market conditions. The $6.3 billion mortgage REIT specializes in the origination and management of commercial mortgage loans and other CRE debt investments, as well as owning properties, infrastructure debt, and residential debt. Its total assets stood at $27.3 billion at the end of its fiscal 2023 third quarter, down sequentially by $700 million. Unlike other large mREITs that focus solely on specific sectors, STWD has utilized diversification as a competitive advantage.
Starwood Property Trust Fiscal 2023 Third Quarter Supplemental 
STWD’s current price reflects 10.3x its annualized distributable earnings at $0.49 per share at the end of the third quarter. However, the 14% exposure to office properties has raised concerns among some investors, especially given the prevailing trend of remote work and the anticipation of prolonged high interest rates. The dividend coverage is at 102%, with a relatively low GAAP debt-to-equity ratio, indicating potential resilience to economic challenges in 2024.
Commercial Lending Credit Underwriting Quality, Net Asset Value, And Dividend Safety
Starwood Property Trust Fiscal 2023 Third Quarter Supplemental
The commercial lending segment held 156 loans with a weighted average risk rating of 2.9, with a majority of loans (58.86%) performing in line with underwritten expectations. The company has actively deployed capital, with $2.7 billion of new investments over a twelve-month period.
Commercial term loans originated totaled $420.65 million as of the end of the third quarter, while infrastructure lending originated during the same period reached $554 million, signaling a shift in investment strategy. The company remains cautiously optimistic, as reflected in the strong third-quarter revenue and ongoing strong asset originations.
Conclusion
Despite a slight dip in GAAP book value per share, Starwood Property Trust remains well-positioned, with a trading price at a discount to both GAAP and undepreciated book value per share. With continued economic strength, the common shares are considered a hold at their current level.
