Rithm Capital Corp (RITM)

[ThSeeker]

New Residential Investment (NRZ)
[Forbes] Brett Owens
June 11, 2017

Dividend Yield: 12%

We all know about the struggles of many mortgage REITs over the past few years, but for the past 18 months or so, New Residential Investment (NRZ) has been a breath of fresh air.

NRZ – a spinoff of Newcastle Investment (NCT) – invests in, among other things, mortgage servicing rights (MSRs), which “provides a mortgage servicer with the right to service a pool of mortgage loans in exchange for a fee.” Specifically, NCT specializes in investments in “excess MSRs,” which is the money left over from the MSR once basic servicing feeds have been taken out to whoever is actually servicing the loan. These excess MSRs are an outstanding, stable source of cash flows.

New Residential also invests in plain MSRs, residential securities and call rights, residential and consumer loans and servicer advancements.

The company is just a few months removed from a freshly hiked dividend, which at 48 cents per share is both well covered by 54 cents in core earnings, and good for a sweet 12% yield. Like most other mREITs, don’t expect NRZ to be a smooth ride, but longer-term, the business (and the stock) are pointed in the right direction.