With interest rates continuing to rise, stocks have been trying to figure out if this is a good thing — an expanding economy — or a bad thing — inflation.
When it comes to financial stocks, rising rates are generally a good thing. Since they have to have easily accessible reserves on hand, they have a lot of money sitting in cash equivalents. When rates rise, they make more money on those assets. The monies they deploy in the form of loans also have higher rates, which go to their bottom line as well.
The 10 top-rated financial stocks to bank on right now, are all strong performers and will continue to deliver in coming quarters. A fair number are real estate investment trusts (REITs), which makes them ideal for investors looking for long-term growth and income.
As JPMorgan Chase showed yesterday, banks and other financial institutions are in a strong position here as long as the economy continues to deliver solid, sustained growth.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties Inc (NYSE:IIPR) is one of the more unique REITs out there today — it specializes in the acquisition, ownership and management of industrial properties used for medical-cannabis production.
And given its niche, it shouldn’t be a surprise that the stock is up 30% year-to-date and 137% in the past 12 months. Cannabis stocks are volatile right now, but IIPR has a more measured play than other weed stocks.
Simply providing the spaces and the management of those facilities keeps them out of some of the thornier issues that come along with the nascent industry, from banking to regulation.
Even after those big gains, it’s still delivering a near-3% dividend.
Guaranty Federal Bancshares (GFED)
Guaranty Federal Bancshares Inc (NASDAQ:GFED) is a Missouri-based bank that has been serving the state since 1913.
Technically GFED was established as a holding company in 1997 that operates the bank. But either way, the opportunity here is a recovering economy means GFED will have more opportunities to expand its customer base. And it will grow its cash reserves faster as rates rise as well.
This sector isn’t dynamic, but in this kind of market, it’s good to know you have solid performers that aren’t going to gyrate to the news of the day.
Up 5% year-to-date, GFED also delivers a respectable 2% dividend.
Ladder Capital (LADR)
Ladder Capital Corp (NYSE:LADR) is a commercial mortgage lender.
While the housing market has been affected by rates, commercial building and leasing has continued as companies look to move their workforce or consolidate space.
The Amazon headquarters is a good example, on a very large scale. But to compete in certain markets, it’s good to establish a presence. Also, as states change their tax laws, companies are looking to find more advantageous places to locate their companies.
LADR has had a great year so far, the stock is up 27% and it’s also throwing off a massive 13% dividend.
Siebert Financial (SIEB)
Siebert Financial Corp (NYSE:SIEB) is structured as a bank holding company, but most of its business is really focused on brokerage services. Founder Muriel Seibert was one of the first women brokers on Wall Street.
Today, SIEB has a $335 million market cap, so it’s not a huge firm. But it does have a solid reputation and good client list on the institutional side. And that’s where the real money is in the brokerage business.
SIEB soared in December when it announced a discount brokerage deal with Overstock.com. Since then, the stock has been digesting that 200% up move but has a lot of promise moving forward.
Bank First National (BFC)
Bank First National Corp (NASDAQ:BFC) operates as a bank holding company and was first established in 1894 in Manitowoc, Wisconsin.
Today, it continues to expand its branches around the state. Less regulation for local and regional banks has been helpful to smaller institutions and rising rates is also helpful.
Again, this isn’t a rocket ship of growth, but it’s a steady grower — 12% year-to-date — with a decent dividend – 1.6%. Its duration means it knows its market well and has proven that it can prosper even in tough times.
Merchants Bancorp (MBIN)
Merchants Bancorp (NASDAQ:MBIN) is a bank holding company based in Indiana. It currently maintains about $3.8 billion in assets.
What makes MBIN an interesting play is it operates as a mortgage company for a variety of customers. It has a multi-family mortgage division, which is especially hot today as potential home buyers have stepped out of the market and choose to rent while rates stabilize.
It also holds mortgages for non-depository financial institutions until they can be sold to an investor. Generating commissions off these sales is a good business since MBIN is merely the middleman between the mortgage generator and the buyer.
Up 23% year-to-date, MBIN’s business model is well structured for the current market.
Cherry Hill (CHMI)
Cherry Hill Mortgage Investment Corp (NYSE:CHMI) is structured as a REIT, which means it distributes its taxable income to its shareholders in the form of a dividend.
And the fact that its current dividend is around 10.4% certainly makes this stock an interesting investment.
Also, CHMI has a unique niche in the REIT world. As opposed to owning and managing properties, CHMI manages a portfolio of mortgage servicing rights, residential mortgage-backed securities and residential mortgage assets.
Essentially, it holds paper rather than property.
Ares Capital (ARCC)
Ares Capital Corp (NASDAQ:ARCC) is basically a publicly listed private equity firm that finances and invests in smaller businesses around the country. It’s now the largest business development company by market cap and assets, with growing operations in Europe as well.
This is a good time to be involved with small companies looking to grow. And instead of having to pick and choose, you can count on these experts to build out a portfolio of strong companies.
ARCC stock delivers a 9% dividend and has gained 10% year-to-date, so this is a solid addition for long-term investors looking to capitalize on a reviving economy.
Arbor Realty Trust (ABR)
Arbor Realty Trust Inc (NYSE:ABR) is structured as a REIT that specializes in financing for multi-family housing as well as senior housing, healthcare and other commercial real estate.
Because ABR is in some of the hottest sectors in the market today, it continues to deliver. The stock is up 39% year-to-date and it has a 9% dividend.
Given the trends in the economy — aging baby boomers, more cost-effective, decentralized healthcare, more renters than buyers — ABR is in a great position to continue this kind of solid growth for years to come.
Sachem Capital Corp (NYSE:SACH) is a small REIT — market cap around $60 million — with a big dividend. Currently, its dividend yield sits at 12.3%.
Basically, SACH is a lender of short-term real estate mortgage loans on commercial properties. For example, if you’re a real estate investor that is interest in building a strip mall on a piece of property, you get in touch with SACH.
SACH holds the mortgages and then shares the income that they generate with its shareholders. While the stock price has been flat for the year, this is really a dividend play that will produce solid returns for the long term.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.