13%-Yielding NexPoint Real Estate Finance Stock Reports “Another Strong Quarter”
April 3, 2025
Outlook Remains Bullish for NexPoint Real Estate Finance
At the March Federal Open Market Committee (FOMC) meeting, the Federal Reserve kept its key overnight lending rate, which impacts interest rates, in a range of 4.25% to 4.5% for the second consecutive meeting. This came after the Fed announced three consecutive interest rate cuts that began in September 2024.
The Fed left interest rates unchanged in large part due to the impact that tariffs are expected to have on a slowing economy. On the plus side, the Fed said that, while inflation remains elevated, it has come down over the past year.
The Fed is expected to announce two interest-rate cuts in 2025, which would bring the federal funds rate down to a range of 3.75% to 4.0%. That’s still significantly higher than where it was before the 2020 health crisis. In October 2019, the federal funds rate was in a range of 1.5% to 1.75%. (Source: “Federal Funds Rate History 1990 to 2025,” Forbes, last accessed March 26, 2025.)
While most people don’t like higher interest rates, they are good for businesses that loan out money, such as mortgage real estate trusts (mREITs) like NexPoint Real Estate Finance Inc (NYSE:NREF).
There’s a fine line with interest rates when it comes to mREITs. If rates are too high, it could leave potential borrowers on the sidelines. On the other hand, lower rates could mean less income from interest, but it could also lead to more lending. And the current interest-rate environment has proven to be lucrative for NexPoint Real Estate Finance.
The Dallas-Texas-based mREIT primarily focuses on investments in the multifamily, single-family rental (SFR), self-storage, life science, hospitality, and office sectors, located predominantly in the top 50 metropolitan statistical areas. (Source: “4Q 2024 Financial Supplement,” NexPoint Real Estate Finance Inc, February 27, 2025.)
NexPoint focuses on lending to or investing in properties that are stabilized or require limited deferred funding to support leasing or the ramping up of operations, for which most capital expenditures are for value-added improvements.
The mREIT’s portfolio has minimal exposure to construction loans and has no heavy transitional or for-sale loans.
NexPoint Real Estate Finance’s outstanding total portfolio is comprised of 83 investments worth $1.2 billion. The portfolio is geographically diverse with a bias towards the Southeast and Southwest.
Another Strong Quarter
NexPoint reported fourth-quarter net income of $8.4 million, or $0.43 per share. Its cash available for distribution was $10.9 million, or $0.47 per share. (Source: “NREF Announces Fourth Quarter 2024 Results, Provides First Quarter 2025 Guidance,” NexPoint Real Estate Finance Inc, October 31, 2024.)
Earnings available for distribution came in at $0.83, almost double the $0.44 from the fourth quarter of 2023 and topping Wall Street forecasts of $0.76 per share.
Commenting on the third-quarter performance, Matthew McGraner, NexPoint Real Estate Finance’s chief investment officer said, “NREF is pleased to announce another strong quarter, demonstrating steady and resilient earnings across our primary property types. In an environment where banks and traditional lenders are frequently sidelined or distracted by credit issues, we remain proactive and dedicated.”
Looking ahead to the first quarter, NexPoint expects to report earnings available for distribution of $0.45 and cash available for distribution of $0.50 at the midpoint.
Quarterly Dividend of $0.50/ Share Declared
Investors love mREITs because they make a lot of money and, thanks to a federal loophole, must distribute at least 90% of their taxable income to shareholders in the form of a dividend. This can result in mREITs paying out some of the most reliable high-yield dividends on Wall Street.
In February, NexPoint declared a quarterly dividend of $0.50 per share, or $2.00 per share on an annual basis, for a forward yield of 12.71%. This is slightly higher than NexPoint Real Estate Finance stock’s five-year average dividend yield of 10.12%. (Source: “NexPoint Real Estate Finance, Inc. Announces Quarterly Dividend,” NexPoint Real Estate Finance Inc, February 26, 2025.)
When the company has a really good quarter, it can also distribute a special dividend. In October 2023, NexPoint declared a regular dividend of $0.50 per share and a special dividend of $0.185 per share. (Source: “NexPoint Real Estate Finance, Inc. Announces Quarterly and Special Dividends,” NexPoint Real Estate Finance Inc, October 31, 2023.)
NexPoint Real Estate Finance Stock Up 27% Year Over Year
Typically, a high dividend yield is attached to a stock that isn’t doing very well. That’s because yield and share price have an inverse relationship with each other. With NexPoint Real Estate Finance stock though, you’re getting both a high-yield dividend and a stock that’s thumping the broader market.
As of March 26, NexPoint Real Estate Finance stock is up 27% on an annual basis, 8.8% over the last six months, and 2.1% year to date. For comparison’s sake, the S&P 500 is up 10% on an annual basis, but is down 0.3% over the last six months and 2.6% year to date.
Chart courtesy of StockCharts.com
The Lowdown on NexPoint Real Estate Finance Stock
NexPoint Real Estate Finance, Inc. is a great mREIT with a geographically diverse portfolio that has a weighted average remaining term of 4.5 years. This helps provide income investors with a reliable and transparent earnings stream for almost five years.
As an mREIT NexPoint doesn’t follow the same strict lending rules that traditional lenders do. This allows it to deploy capital even in this challenging credit market and seize market opportunities, creating long-term value for its shareholders.
And long-term value is what common shareholders and institutional investors are seeking. Of the 107 institutions holding 69.9% of all outstanding NexPoint Real Estate Finance stock, some of the biggest holders are Nexpoint Asset Management, BlackRock Inc, The Vanguard Group, and Raymond James Financial, Inc.
