Insights

A Long-Term Winning Dividend Stock Selling for Cheap Right Now

Walker & Dunlop‘s (NYSE: WD) core business may be misunderstood, but it continues to perform well. In this clip from “The Rank” on Motley Fool Live, recorded on July 27, Fool.com contributors Matt Frankel and Jason Hall examine the tremendous growth potential for the commercial real estate financial services company and its stock.

Matt Frankel: You mentioned that Walgreens (NASDAQ: WBA), investors are in show-me mode, like prove it, prove that you can do this. Walker Dunlop has been proving it. They’ve been a 10-bagger since their IPO, which was in just 2010.

Jason Hall: Almost a hundred-year-old business and just IPO’d under Willy, right?

Frankel: Yeah. Just IPO’d in 2010, he took over, I want to say like two years prior. Amazing business. They’ve built up tremendous share in commercial loan origination, commercial mortgage servicing, they’re a property brokerage. They’re just rolling out an investment banking division.

I think kind of like how you said Live Oak (NASDAQ: LOB) is small business focused. Because of that, it’s a misunderstood bank. I feel like Walker & Dunlop is misunderstood because, a lot of investors, they equate commercial real estate with residential real estate. It’s really not the same.

Hall: Multi-family is like a big chunk. That’s a big part of what they do.

Frankel: Multi-family is their big focus.

Hall: Right. People hear multi-family and they think residential and they think interest rates are going up and it’s only going to be bad from here. That’s a misunderstanding of their business.

Frankel: Commercial loans don’t really follow the residential mortgage market that much. Commercial property demand doesn’t necessarily follow residential. We’ve talked many times about how there’s a short supply of existing homes on the market, things like that. There’s no lack of demand for commercial properties, there’s no lack of development going on. It’s a different market.

I feel like the stock has been misunderstood. I feel like it does not deserve the 32% haircut that it’s gotten recently. This is still a small cap company, which I don’t think a lot of people realize. I think it has the potential to dominate the commercial real estate finance space. Because I can’t name another pure-play that has as much potential and success so far.

Hall: Yeah, and it’s interesting to me because as much as it has grown, it still has high-single-digit market share of what it does. I think there’s still a lot of room to continue to consolidate and take share, even in a reasonably low-growth business. This isn’t a high-growth business, but its ability to take share in the things it already does while continuing to expand.

The asset management business, I think that could get really big. The investment banking business, I don’t think they want to make that too big, but I think it can be a really good business and a really profitable business for them. I think I bought for less than or right around 12 times earnings. It’s about 12.7 times earnings now, but that is just such a great valuation.

I think it’s completely thrown in there with all the residential real estate stuff. I just think that’s the misunderstanding, is that people think of it like a single-family home lender. It’s not. All of the cadence and the cycles that the industry that it’s exposed to work on are completely unrelated.

Frankel: To put a number with what you just said, they have a 9% share of multi-family lending and they are the No. 1, so it’s a very fragmented market. They have less than 2% of the rest of the commercial loan market, which they’re getting into. I’d say don’t sleep on that investment bank because it’s focusing on affordable housing, which is a massive need right now. They’re specializing in tax credits syndication, that’s through an acquisition they just made.

We have one minute left, so I can’t really explain thoroughly what that is. [laughs] But it’s an affordable housing play and I could see that getting a lot bigger. I like these five, I like these investments. They get my stamp of approval if that matters to you at all.

Jason Hall has positions in Live Oak Bancshares, Walgreens Boots Alliance, and Walker & Dunlop. Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Live Oak Bancshares and Walker & Dunlop. The Motley Fool recommends Walker & Dunlop, Inc. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Rebate Rewards

Level 2 Rebate

Deposit $2,000 and get $200 Rebate
$ 200 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $2,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $200 Rebate
Popular

Level 1 Rebate

Deposit $1,000 and get $100 Rebate
$ 100 Rebate
  • 3 Simple Steps
  • 1. Register Using The Link Below (Promo-Code: WEBREBATE)
  • 2. Deposit $1,000 and place one trade at any non-Austalian market within 30 calendar days
  • 3. Receive Your $100 Rebate

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here To Get Started
EASY QUALIFICATION & LOW ENTRY
NEW CLIENT REBATE OFFER
EARN UP TO $200 CASH REBATE
Act Fast - Promotion Ends In
Click Here For More Info