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Monday's Featured Content
Starwood Shares Have Struggled, but Catalysts Could Signal a TurnReported by Jennifer Ryan Woods. Date Posted: 3/31/2026. 
Key Points
- Starwood Property Trust has been under pressure from rising interest rates and company-specific challenges, with the stock down more than 30% over the past five years and lagging its peers over the last year.
- Inconsistent earnings, repeated revenue misses, and uneven dividend coverage have weighed on investor sentiment, even as the company has maintained its high dividend payout.
- Recent developments, including a stronger earnings report, improving commentary around dividend coverage, and a newly authorized share buyback, could help shift sentiment if the company delivers more consistent results.
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Over the last several years, the higher interest rate environment has been a persistent headwind for commercial real estate, and Starwood Property Trust (NYSE: STWD) hasn't been spared. The real estate investment trust (REIT)—which originates, acquires, and manages commercial mortgage loans and other real estate-related investments—has seen its stock trend meaningfully lower over the last five years. The past year has been challenging for the company, driven by disappointing revenue, declines in book value per share (BVPS), and several quarters in which earnings failed to cover its dividend. Still, recent developments could signal a near-term turn: better-than-expected revenue, constructive commentary about dividend coverage, and a newly authorized share buyback. Pandemic Pressure Followed by Rising Rates Pressured SharesStarwood’s struggles intensified during the COVID-19 pandemic, when shares plunged in early 2020 from around $26 to below $10 as mortgage REITs faced liquidity concerns and broad uncertainty in commercial real estate markets. Shares recovered to pre-pandemic levels by mid-2021, but new headwinds emerged in 2022. As interest rates began rising in March 2022, property values fell and lending margins tightened, once again pressuring commercial mortgage REITs.
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The impact on STWD has been notable: shares are down more than 30% over the past five years. Peers experienced similar pressure—Ares Commercial Real Estate (NYSE: ACRE), Blackstone Mortgage Trust (NYSE: BXMT), and Apollo Commercial Real Estate Finance (NYSE: ARI) fell roughly 65%, 40%, and 27%, respectively, over the same period. Over the last year, Starwood has lagged that group. The stock is down about 12% over 12 months and, at a recent trading price near $17.37, has been trading close to the 52-week low it hit in April 2025. It has also underperformed the broader REIT industry, which is down less than 12%. Over the past 12 months, Ares shares have risen roughly 4.75%, Blackstone Mortgage Trust is down about 3.65%, and Apollo Commercial Real Estate Finance is up more than 10%. Inconsistent Earnings and Dividend Coverage Weigh on SentimentStarwood has struggled with inconsistent results. Earnings per share (EPS) have beaten estimates in four of the last six quarters, yet revenue missed in five of those six quarters. The company also reported weaker net interest income in several periods, which has weighed on investor sentiment. Dividend coverage has been another concern. For more than a decade the REIT has paid a quarterly dividend of 48 cents per share, which currently yields about 11.26%. But over the past four quarters, reported earnings have not fully covered the dividend, implying a payout ratio near 165% (about 113% based on 2025 distributable EPS). Against a still-challenging higher-rate backdrop, mixed earnings and uneven dividend coverage have made investors cautious. Still, a handful of recent developments—solid revenue, management’s positive commentary on improving coverage, and an authorized buyback—could help restore confidence. Stronger Results and a Potential Buyback Could Shift SentimentIn Starwood’s Q4 2025 earnings report, released Feb. 25, the REIT reported EPS of $0.42, beating analyst estimates by $0.01. Revenue of $492.95 million came in roughly $23 million above estimates—the first revenue beat after multiple consecutive misses. Starwood also highlighted a stronger liquidity position, having executed $4.4 billion in capital raises and ending the year with $1.4 billion in liquidity. While EPS still fell short of covering the 48-cent quarterly dividend, management said on the earnings call it expects dividend coverage to improve steadily through the year. A continuing decline in BVPS, however, remains a concern. After the release, the board authorized the repurchase of up to $400 million of common stock and convertible notes over the next 12 months using existing cash. A buyback equal to as much as about 6% of shares outstanding could meaningfully boost EPS and support the share price, depending on execution. Wall Street Is Waiting for Clearer Signs of ImprovementThe market reaction to the fourth-quarter results and the buyback was muted. Shares rose roughly 2% on higher-than-normal volume, but two analysts trimmed their price targets even as they maintained Outperform ratings. At present, four analysts rate the stock a Hold and three rate it a Buy. The average 12-month price target implies nearly 16% potential upside from current levels. Wall Street may remain cautious until Starwood delivers more consistent quarters—specifically stronger earnings and revenue, improving dividend coverage, and visible execution of the repurchase program. If management can show progress on those fronts, the outlook could become more constructive in the near term. |
