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New Residential (NRZ) Closes Caliber Buyout, Hikes Dividend

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New Residential Investment Corp. has completed the previously-announced acquisition of Caliber Homes Loans, Inc., an eminent mortgage originator and servicer. With this, the company has expanded its mortgage operations with around 4% of the mortgage origination market share.

The acquisition was funded through a mix of existing cash and liquidity available on the balance sheets of both companies.

Per New Residential management, “with this acquisition we have extended our ability to offer a broad spectrum of mortgage products to borrowers throughout their homeownership journey. We expect the combination of Caliber and Newrez to contribute meaningfully to New Residential’s growth in 2021 and beyond.”

With the buyout, the company will combine its flagship mortgage originator and servicer arm, Newrez LLC, with Caliber, thereby, augmenting competencies, products and footprint across mortgage origination and servicing businesses.

Specifically, the buyout adds around $150 billion unpaid principal balance (UPB) of mortgage service rights (MSRs), improved technological operations, and an expanded local presence, particularly in the purchase lending space.

On a combined basis, Newrez and Caliber funded around $45 billion UPB of volume in second-quarter 2021 and serviced $465 billion of mortgage loans. Hence, the buyout posies New Residential to capture significant market share and accelerate growth.

Following the buyout announcement, New Residential cheered investors with a 25% dividend hike in third-quarter dividends.  It will now pay out a dividend of 25 cents per share, up from 20 cents disbursed in the prior quarter. The increased dividend will be paid out on Oct 29 to its shareholders of record as of Oct 4, 2021.

The company’s ability to sustain the hiked dividend depends on the operational strength and the payout ratio. Its current payout ratio of 50.8% is lower than its industry’s average of 77.6%, indicating scope for its steady dividend increase.Its performance depicts a robust earnings picture. Its top line is projected to witness a growth rate of 19.4% in 2021.

We believe that such disbursements highlight the company’s operational strength and commitment toward rewarding its shareholders handsomely.As investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to bet their money on, solid dividend payouts are therefore arguably the biggest enticement for REIT investors. Such moves also boost investors’ confidence in the stock and will likely bump up the company’s shares in the upcoming period.

Shares of this Zacks Rank #3 (Hold) company have gained 32.1% over the past year, underperforming the industry’s 36.2% rally.


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