The Fed’s rapid increase in interest rates, starting in 2022 at nearly zero and peaking at more than 5%t in 2023, was hard on the business success of Arbor Realty Trust (ABR), and for its investors.
Arbor Realty Trust primarily provides financing for multi-family property investors. Loans on these types of property investments almost always have adjustable-rate interest rates. As the Fed kept rates high for several years, the stress on the Arbor loans grew, forcing the company to make modifications or even take back properties—known as real estate owned (REO) in the industry.
After a long history of dividend growth with no reductions, the company had to slash the payout by 30% in May 2025. Arbor has paid the current $0.30 dividend for three straight quarters.
Now, as interest rates are starting to decline, Arbor has two distinct business operations.
The current business lines, which include packaging loans for agency mortgage-backed securities, a bridge lending program, a single-family rentals lending program, and construction lending, are performing very well. All of these business lines saw accelerating activity and profits in the third quarter. Net income of $0.35 per share beat analyst estimates by $0.11 and was up from the $0.30 reported for the second quarter.
The other side of the business is the company’s legacy book of loans, many of which are in trouble. For the third quarter, Arbor reported delinquent assets of $750 million, up from $529 million at the end of the second quarter. The REO book was at $470 million at the end of the third quarter. This $1B-plus collection of assets are not earning interest, thus explaining the source of the dividend cut a few quarters ago.
The market did not like the growth in bad debt and REO. The ABR share price dropped by over 12% the next day and has yet to recover.
There are a couple of key facts that investors are overlooking. The Arbor management team is accelerating the rate of classifying loans as delinquent and taking back properties. They are also in an accelerated program to work through the non-interest-bearing legacy assets. CEO Ivan Kaufman stated that he expects the company to generate sufficient income to initiate dividend growth by the second half of 2026.
Kaufman also said that he expects Arbor to continue paying the current ($0.30) dividend rate. ABR now yields over 12%, so, if you buy shares now, you’ll receive an excellent yield—and there is a significant chance of substantial share price appreciation in 2026.
I expect Arbor Realty Trust to be the high-yield turnaround story of 2026.
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