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Friday's Bonus Article
Starwood Shares Have Struggled, but Catalysts Could Signal a TurnAuthor: 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, higher interest rates have been a persistent headwind for commercial real estate, and Starwood Property Trust (NYSE: STWD) has been no exception. The real estate investment trust (REIT)—which specializes in originating, acquiring, and managing 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, driven by disappointing revenue, declines in book value per share (BVPS), and several quarters in which earnings failed to cover the dividend. Still, recent developments could signal near-term upside. Pandemic Pressure Followed by Rising Rates Pressured SharesStarwood’s struggles began during the COVID-19 pandemic, when shares plunged in early 2020—from around $26 to below $10—after mortgage REITs were hit by liquidity concerns and broad uncertainty across commercial real estate markets. Shares rebounded to pre-pandemic levels by mid-2021 as investor confidence returned, but new headwinds emerged when rates began rising in March 2022, causing property values to decline and lending margins to tighten.
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The impact on STWD has been significant: shares are down more than 30% over the past five years. Competitors such as Ares Commercial Real Estate (NYSE: ACRE), Blackstone Mortgage Trust (NYSE: BXMT), and Apollo Commercial Real Estate Finance (NYSE: ARI) also fell over the same period, down roughly 65%, 40%, and 27%, respectively. Over the past year, Starwood has underperformed the group, declining roughly 12%. At a recent trading price around $17.37, the stock has been flirting with the 52-week low it hit in April 2025. Starwood has also lagged the broader REIT industry, which is down less than 12%, and trails many of its peers. Over the past 12 months, Ares shares are up about 4.75%, Blackstone Mortgage Trust is down roughly 3.65%, and Apollo Commercial Real Estate Finance is up more than 10%. Inconsistent Earnings and Dividend Coverage Weigh on SentimentOne persistent issue for Starwood has been inconsistent earnings. While earnings per share (EPS) have beaten expectations in four of the last six quarters, revenue missed estimates in five of those six quarters. The company has also reported weaker net interest income in certain quarters, which has weighed on sentiment. Starwood’s dividend has added to investor concern. For more than a decade, the REIT has paid a quarterly dividend of $0.48 per share, which currently yields about 11.26%. But over the past four quarters, earnings did not fully cover the dividend, producing a payout ratio near 165% (about 113% based on 2025 distributable EPS). Against the still-challenging higher-rate backdrop, mixed earnings and uneven dividend coverage have kept some investors cautious. Still, several recent developments — including a beat on revenue, reassuring commentary about dividend coverage, and an authorized share repurchase — 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 estimates by $0.01. Revenue of $492.95 million came in roughly $23 million above estimates, marking a reversal after several consecutive revenue misses. The company highlighted a stronger balance sheet, noting it executed $4.4 billion in capital raises and finished the year with $1.4 billion in liquidity. While EPS still did not cover the $0.48 quarterly dividend, management said on the earnings call that it expects dividend coverage to improve gradually through the year. Despite these positives, a continued decline in BVPS remains a concern. After the earnings release, Starwood’s board authorized the repurchase of up to $400 million of outstanding common stock and convertible notes over the next 12 months using existing cash. A buyback equal to as much as roughly 6% of shares outstanding could materially boost EPS and help support the share price, though execution and timing will matter. Wall Street Is Waiting for Clearer Signs of ImprovementMarket reaction to the Q4 report and buyback authorization was mixed. Shares rose about 2% on higher-than-normal volume, but two analysts trimmed their price targets even as they maintained Outperform ratings. Currently, four analysts rate STWD a Hold and three rate it a Buy. The average 12-month price target implies nearly 16% upside versus the current share price. Wall Street may remain in a wait-and-see stance, but the outlook could turn more constructive if Starwood delivers another quarter of stronger earnings and revenue, improves dividend coverage, and begins actively repurchasing shares. |
