This Ultra-High-Yield Dividend Stock Is Dirt Cheap -- and Wall Street Thinks It Will Soar Nearly 30% Over the Next 12 Months

Growth investors, income investors, and value investors have different objectives. It makes sense that they will rarely find a stock they can all like. 

This doesn't mean that there aren't any stocks that offer tremendous growth prospects, juicy dividends, and are available at a discount. Here's one ultra-high-yield dividend stock that's dirt cheap -- and Wall Street thinks it will soar nearly 30% over the next 12 months.

Feeling the Rithm

Rithm Capital (RITM 0.81%) is organized as a real estate investment trust (REIT). Like all REITs, it must return at least 90% of its income to shareholders through dividends to be exempt from paying federal taxes.

That background helps explain Rithm Capital's ultra-high dividend yield of nearly 11.2%. However, Rithm wouldn't be able to pay such an attractive dividend for long if it wasn't generating strong profits. In the third quarter of 2023, the REIT reported earnings of $280.8 million that were available for distribution. 

Rithm owns close to 4,100 single-family rental units. However, it doesn't just invest in real estate and rake in lease payments as some REITs do. The company also originates and services residential mortgage and transitional loans. It invests in mortgage servicing rights (MSRs). It handles consumer loans as well.

Over the years, Rithm Capital has expanded through multiple acquisitions. In 2023 alone, the company bought Marcus consumer loans from Goldman Sachs and announced the planned acquisitions of Sculptor Capital Management and Specialized Loan Serving.

Cheap but with a nice growth runway

Although Rithm Capital is easily outperforming the overall market so far this year (especially based on total returns), its stock remains cheap. The REIT's shares trade at a forward earnings multiple of only 5.6x.

Wall Street is overwhelmingly bullish about the stock. Of the 12 analysts surveyed by Refinitiv in September that cover Rithm Capital, 10 rated it as either a buy or a strong buy. None recommended selling the stock. 

The average 12-month price target for Rithm reflects an upside potential of roughly 28%. Even the most pessimistic analyst thinks that the stock could rise by more than 14%. 

High interest rates are great for Rithm Capital. CEO Michael Nierenberg said in the company's third-quarter earnings call that "the rate environment and the macro environment for what we do is probably -- it hasn't been this good in probably 25 or 30 years."

Nierenberg predicted that if all of Rithm's pending deals close, it could have $50 billion in assets under management and $7.2 billion in equity capital by the end of 2023. He also said that the company sees great opportunities to expand its presence in commercial real estate.

What could cause Rithm Capital to skip a beat

Perhaps the greatest risks for Rithm Capital are that its tenants won't be able to pay their rent and its borrowers won't be able to make payments on their loans. An economic downturn could increase delinquency rates.

There are plenty of reasons to be concerned about the U.S. economy. Those high interest rates that work to Rithm's advantage could help trigger a recession. The federal government faces the potential of a shutdown if Congress doesn't reach a budget deal by Nov. 17, 2023. Tensions in the Middle East could lead to a broader conflict. 

For now, though, things look generally upbeat for Rithm Capital. Investors looking for growth, income, and an attractive valuation might want to take a hard look at this stock.