Rithm Capital Corp.: history, ownership, mission, how it works & makes money

A Brief History of Rithm Capital Corp.

Rithm Capital Corp. was founded in 2012, originally operating as a real estate investment trust (REIT) focused on investing in, financing, and managing residential mortgage loans, including whole loans and mortgage-backed securities. The company's strategy emphasized generating attractive risk-adjusted returns by capitalizing on dislocations in the market.

In 2021, the company rebranded from New York Mortgage Trust, Inc. to Rithm Capital Corp., reflecting a broader diversification strategy beyond residential mortgages to include commercial assets and other real estate sectors. This strategic pivot was part of an effort to better position itself in response to evolving market conditions.

For the year ended December 31, 2022, Rithm Capital reported assets totaling approximately $2.52 billion. The company maintained a consistent dividend policy, culminating in a total annual dividend payout of $0.80 per share, resulting in a dividend yield of approximately 10.6% based on its share price around that period. This yield demonstrates Rithm's commitment to returning capital to its shareholders.

In Q2 2023, Rithm Capital reported a net income attributable to common stockholders of $22.7 million, translating to earnings per share (EPS) of $0.20. This marked an increase from $15.1 million and an EPS of $0.14 in Q2 2022.

By mid-2023, Rithm Capital's stock performance had shown resilience despite broader market fluctuations. The stock traded in a range between $7.50 and $8.40, demonstrating a stable investor interest amid rising interest rates and economic uncertainty.

The company's investment strategy has also evolved, with significant allocations to commercial real estate assets, leading to a more diversified portfolio that mitigates risk associated with market volatility in any single sector. As of the last report, approximately 40% of its portfolio consisted of commercial loans and securities, showcasing this strategic diversification.

Moreover, Rithm Capital has actively engaged in share repurchases, with an announced program in 2022 to buy back up to $100 million of its common stock, signaling confidence in its valuation and future prospects.

Rithm's operational strategy continues to focus on leveraging its expertise in real estate finance to identify profitable investment opportunities and enhance shareholder value, aiming for sustainable growth in an increasingly competitive market environment.

A Who Owns Rithm Capital Corp.

Rithm Capital Corp., listed on the New York Stock Exchange under the ticker symbol RITM, has a diverse ownership structure. As of the latest report at the end of the third quarter of 2023, institutional investors hold a significant portion of the company's shares.

Here is a breakdown of Rithm Capital Corp.'s ownership structure:

Among institutional investors, notable shareholders include:

• BlackRock Inc. – with a stake of approximately 16.4% or 57.57 million shares.
• The Vanguard Group, Inc. – holding around 12.8% or 44.70 million shares.
• Invesco Ltd. – owning about 5.1% which is approximately 17.85 million shares.

Insider ownership reflects confidence in the company’s direction, with key executives such as the CEO and CFO holding shares. The CEO holds approximately 1.2%, translating to 4.23 million shares.

The remaining portion is predominantly owned by retail investors. This diverse ownership provides a balanced governance structure and reflects market confidence, as seen by Rithm Capital Corp.'s performance. The company's market capitalization as of October 2023 is approximately $3.45 billion.

The stock performance of Rithm Capital Corp. has been notable, with the share price averaging around $14.05 in the past six months, showcasing a resilient position in a fluctuating market. This performance is influenced by the company's dividend yield of 9.2%, appealing to income-focused investors.

Overall, the ownership structure of Rithm Capital Corp. illustrates a significant institutional backing combined with strategic insider holdings and retail investor participation, contributing to its financial stability and market standing.

Rithm Capital Corp. Mission Statement

Rithm Capital Corp., listed on the New York Stock Exchange under the ticker symbol RITM, operates as a real estate investment trust (REIT) focused on the acquisition and management of real estate-related assets. The company aims to deliver sustainable and attractive returns to its shareholders by employing a disciplined investment strategy and maintaining a diversified portfolio.

The mission statement emphasizes a commitment to maximizing shareholder value through prudent risk management and strategic asset allocation. Rithm Capital's investment philosophy centers on leveraging extensive market knowledge to identify high-quality investment opportunities while adhering to strong governance practices.

In fiscal year 2022, Rithm Capital reported total revenue of approximately $1.3 billion, reflecting an increase of 15% year-over-year. The company continues to target leverage ratios that allow for flexibility in capitalizing on new opportunities while managing risk effectively.

Rithm Capital's approach is underscored by a disciplined evaluation of market conditions and asset performance, aiming to optimize returns in both upward and downward market cycles. The mission is not only about financial returns but also encompasses a commitment to social responsibility through community engagement and sustainability initiatives.

The company maintains a strong balance sheet, with total assets amounting to approximately $6 billion as of the end of Q2 2023. This strategic positioning allows Rithm Capital to navigate market fluctuations while staying true to its mission of delivering value to stakeholders.

How Rithm Capital Corp. Works

Rithm Capital Corp. is a diversified real estate investment trust (REIT) that focuses on the acquisition, management, and development of a variety of real estate assets. As of the latest financial reports, the company operates primarily in the mortgage and real estate sectors, deploying capital across both residential and commercial properties.

The company primarily invests in mortgage loans, mortgage-backed securities (MBS), and other real estate-related assets. Rithm Capital generates revenue through interest income from loans and MBS, as well as from rental income derived from its owned properties. In the third quarter of 2023, Rithm Capital reported a total revenue of $170 million, representing a significant increase compared to $135 million in Q3 2022.

As of September 30, 2023, Rithm Capital holds a diversified portfolio with the following asset breakdown:

In terms of financial performance, Rithm Capital reported a net income of $50 million in Q3 2023, which reflects a net margin of 29%. The company’s earnings per share (EPS) stood at $0.30, an increase from $0.25 in the same quarter of 2022.

Rithm Capital's capital structure is a combination of equity and debt, which enhances their capacity to leverage investments. The most recent balance sheet shows total liabilities of $3 billion, with total equity amounting to $1 billion, leading to a debt-to-equity ratio of 3:1.

The company has a dividend policy aligned with its REIT structure, which necessitates distributing at least 90% of taxable income to shareholders. In 2023, Rithm Capital declared a dividend of $0.25 per share, which reflects an annualized yield of approximately 8% based on the current stock price.

Market trends affecting Rithm Capital include fluctuations in interest rates, which significantly impact mortgage loan yields and refinancing activity. As of October 2023, the Federal Reserve's target federal funds rate remains between 5.25% to 5.50%, influencing the mortgage market dynamics.

Rithm Capital’s stock, traded under the ticker symbol "RITM," has seen varying performance throughout 2023, with a year-to-date return of approximately 15%, outperforming the broader REIT index which has returned 10%.

Overall, Rithm Capital Corp. utilizes a robust investment strategy that encompasses a mix of mortgage loans, securities, and real estate assets, supported by a diligent financial management approach, positioning itself advantageously within the REIT sector.

How Rithm Capital Corp. Makes Money

Rithm Capital Corp. (ticker: RITM) primarily generates income through several avenues, including residential mortgage assets, investments in mortgage servicing rights, and various financial structures related to real estate. It operates as a diversified capital provider within the real estate and mortgage industries.

As of Q2 2023, Rithm reported a net income of $82 million, translating to earnings per share (EPS) of $0.38. Its revenue for the same quarter stood at $242 million, showing a substantial increase compared to prior quarters.

One of the core revenue streams for Rithm is its investments in residential mortgage loans. The company's strategy includes acquiring mortgage loans that generate stable cash flows. In 2023, it invested approximately $1.8 billion into these mortgage assets, contributing to a solid return on investment.

Additionally, Rithm Capital's investments in mortgage servicing rights (MSRs) have proven lucrative. Rithm currently manages MSRs valued at approximately $3.5 billion, yielding service fees that directly enhance the company's profitability. The company capitalizes on the growing demand for MSRs, especially as the mortgage industry rebounds.

• Rental income from owned properties: $45 million (Q2 2023).
• Gains from securities: $15 million (Q2 2023).
• Income from investment contracts: $20 million (Q2 2023).

The company's diversified approach allows it to mitigate risks associated with fluctuations in the mortgage market. By balancing its portfolio with various asset classes, Rithm has positioned itself to respond effectively to changes in economic conditions.

Rithm Capital has also benefited from its efficient capital allocation strategy. As of mid-2023, the company's debt-to-equity ratio stood at 3.2, indicating a well-leveraged position that helps optimize returns while maintaining manageable risk levels. The weighted average cost of capital (WACC) for Rithm is estimated at 6.5%.

In terms of return metrics, Rithm’s return on equity (ROE) is reported at 12%, reflecting effective management and profitability generation. Additionally, the return on assets (ROA) stands at 1.4%, evidencing efficient asset utilization.

The company’s dividend policy also contributes to its income generation strategy. Rithm Capital pays a quarterly dividend of $0.25 per share, equating to an annual yield of approximately 11.5% based on its current stock price. This dividend yield is competitive within the sector, attracting income-focused investors.

As of the end of Q2 2023, Rithm Capital's stock price was approximately $8.70, with a market capitalization nearing $1.8 billion. The company maintains a solid position in the market, bolstered by its diverse income streams and strategic asset management.