I constantly preach that high-yield investments should be bought and owned for the yield, the cash income. The goal with high-yield investing should be to develop and grow a cash income stream. However, even in the high-yield world, opportunities arise to generate significant capital gains. Here are two stocks to consider.

Over the last several years, Rithm Capital has been making acquisitions to expand its business operations from a relatively simple real estate investment trust (REIT) investing in mortgage servicing rights, to an asset management company with several diverse lines of business.

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On September 4, Rithm announced an agreement to acquire Crestline Management. Crestline, with $17 billion of assets under management, is a fully integrated platform offering private credit and alternative investment strategies across direct lending, opportunistic credit, and fund liquidity solutions.

RITM shares trade at about 0.97 times the $12.71 per share book value. During the second-quarter earnings presentation, management pointed out that comparable standalone businesses traded for much higher multiples. It is not a stretch to believe that, as a multi-line financial services company, RITM could trade for 1.5 times book or $18 to $19 per share. The management team is looking at several steps they could take to get the stock price to reflect those values. I expect RITM to hit $18 sometime in 2026. While waiting, investors earn a nice 8% yield.

Arbor Realty Trust (ABR) provides financing solutions and the origination of commercial mortgage-backed securities for multi-family residential properties. Until the Federal Reserve rapidly jacked up interest rates starting in early 2022, Arbor had steadily grown its dividend since 2013.

The rapid increase in interest rates resulted in growing defaults by Arbor’s borrowing clients. The company has spent much of the last two years working with borrowers to either modify loans or to have Arbor take over properties.

Arbor maintained its dividend through the 2025 first quarter, but in the second quarter, financial results forced a 30% cut in the dividend. Since the Fed started raising interest rates, the ABR share price has been down about 40%, which leaves the current yield at 10.3%.

During the second-quarter earnings call, management discussed the substantial progress being made with underperforming or non-performing loans. Now that the Fed is expected to start cutting rates, it will also help the company’s business. Also, during the call, Arbor CEO Ivan Paul Kaufman stated that he expects the company to be able to return to dividend growth in 2026.

Any announcement of a dividend increase will light a fire under the ABR share price. I expect the shares to appreciate from here by at least 25% by the end of next year. 

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