This Stock's 10% Yield Beats the Market. Its 10-Year Return Doesn't. Is It a Value Trap, or a Real Opportunity?
2026-09-27 11:30
•Matt Dilallo •The Motley Fool
••••• •••••••• Axe Cap view
10% Yield but Beware: Is Ladder Capital a Value Trap?
Ladder Capital’s high dividend yield looks enticing, but its decade-long weak returns make it a cautious play.
Ladder Capital’s 10% yield is eye-catching, especially compared to what you get on the JSE these days. Yet, its 4.7% average annual return over ten years tells a different story. The company's heavy bet on office properties during the pandemic hurt it badly. Since then, it has trimmed that exposure, upgraded its credit rating to investment grade, and trades at a 30% discount to book value. These are solid moves that suggest real improvement. But the question remains: will earnings growth and dividend increases materialise? If the office market recovers and their portfolio repositioning sticks, investors could be rewarded. However, the risk is that shifts in work habits and commercial real estate demand remain weak, keeping their assets impaired. In South Africa, where office sector struggles mirror global trends, local REITs and banks like Standard Bank and Nedbank with property lending exposure should be watched closely. USD/ZAR movement may reflect risk appetite for these kinds of plays if global real estate jitters linger. this is just our opinion and not financial advice
Given the risks, I'd watch Ladder Capital rather than jump in, waiting to see clearer signs of earnings revival before considering a modest position. On the JSE, prefer exposure to well-managed banks like Nedbank over property stocks with heavy office exposure.
- LADR
- USD/ZAR
- Nedbank
- Prolonged weakness in office real estate demand
- Global economic slowdown reducing capital flows to property markets
6/10
Ladder Capital, a commercial mortgage REIT, offers an attractive 10% dividend yield but has underperformed with only 4.7% average annual returns over the past decade. Despite past struggles from pandemic-related office sector exposure, the company has significantly repositioned its portfolio, achieved investment-grade status, and now trades at a 30% discount to book value. The analyst argues it represents a real opportunity rather than a value trap, citing expectations for earnings growth and dividend increases.
Our take is based on reporting first published by The Motley Fool.