Starwood Property Trust, Inc. (STWD): A Bull Case Theory

We came across a bullish thesis on Starwood Property Trust, Inc. on The Swedish Dividend Investor’s YouTube Channel. In this article, we will summarize the bulls’ thesis on STWD. Starwood Property Trust, Inc.'s share was trading at $17.88 as of January 13th. STWD’s trailing and forward P/E were 17.57 and 10.06 respectively according to Yahoo Finance.

Starwood Property Trust is presented as a high yielding REIT designed primarily for income focused investors, with dividends playing a central role in the investment thesis rather than rapid capital appreciation.As a hybrid REIT, Starwood operates across four segments, including commercial and residential lending, infrastructure lending, property investments, and real estate investing and servicing, which allows it to balance loan based income with direct property ownership and helps stabilize cash flows compared with pure mortgage REITs.

Since its founding in 2009, the company has deployed over $112 billion in capital and currently manages a diversified $29.9 billion portfolio, with more than half of its assets in commercial loans and meaningful exposure to owned properties, infrastructure, and residential lending. The portfolio is geographically diverse, heavily weighted toward multifamily and industrial assets, and structured with floating rate loans that can perform across interest rate cycles.

Starwood’s dividend yield exceeds 10 percent and is supported not only by ongoing distributable earnings but also by $3.82 per share in excess unrealized distributable earnings from property gains, which provides an important buffer despite recent quarters showing distributable earnings slightly below the dividend. The company has paid a stable $0.48 quarterly dividend since 2014 and has never cut its dividend, a rare record within mortgage focused REITs.

Management expects earnings to improve as interest rates decline and transaction activity increases, supported by strong liquidity. Valuation is best assessed through a dividend based framework, which suggests fair value around the high teens, broadly in line with the current share price, while long term reinvestment scenarios demonstrate how high yield with low growth can still generate compelling total returns. Overall, Starwood is positioned as a modest but attractive allocation within a diversified high yield income portfolio.

Previously, we covered a bullish thesis on Simon Property Group, Inc. by David in April 2025, which highlighted the company’s disciplined capital structure, dividend growth, and resilience driven by premium tenants and strong free cash flow. The company’s stock price has appreciated by approximately 24.53% since our coverage. This is because the thesis played out as income stability and balance sheet strength were rewarded. The Swedish Dividend Investor shares a similar thesis but emphasizes higher yield and income durability through Starwood Property Trust’s hybrid REIT structure and excess distributable earnings.

Starwood Property Trust, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held STWD at the end of the third quarter which was 25 in the previous quarter. While we acknowledge the potential of STWD as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.