Three specialty finance stocks poised if Fed hikes rates

Interest rate futures price more than an 85% probability of a 25 basis point increase at the Federal Reserve’s Sept. 15–16 meeting. Recent core CPI readings and hawkish remarks at the Jackson Hole symposium shifted market expectations toward a near‑term rate increase.

If the Fed raises the federal funds rate by 25 basis points, benchmark reference rates that determine loan income would rise. Loans and securities that reset with those reference rates deliver higher interest collections as the benchmarks increase.

Ares Capital is a publicly traded business development company with about $29.3 billion of investments. Company filings show roughly 71% of that portfolio carries variable interest rates. In the second quarter the firm originated $2.6 billion in new debt commitments, about 94% of which were at variable rates. Ares uses fixed-rate borrowing on the liability side to lock funding costs, a structure described in its reports as a way to preserve net interest spreads as asset yields rise. The firm has reported a stable or rising dividend for 17 years and its current dividend yield is about 9.7%.

Starwood Property Trust manages a portfolio of roughly $32.2 billion across commercial lending, owned properties and infrastructure finance. Company disclosures indicate about 97% of its $17.3 billion commercial loan book and 96% of its $3.6 billion infrastructure lending adjust with reference rates. A 25 basis point increase in policy rates would affect interest collections on those contracts immediately. Starwood has paid dividends for more than a decade and its yield is about 12.3%.

Ladder Capital manages about $5.8 billion in assets and focuses on short-term, floating-rate bridge loans for commercial properties undergoing renovation or lease-up. First‑mortgage loans account for roughly 49% of its investments, with about 33% in commercial mortgage‑backed securities and 18% in direct real estate equity, according to company reports. Ladder states it actively shifts capital between senior loans and high‑grade securities, targeting a flexible allocation near 65% loans and 20% securities. Because bridge loans reset quickly after policy changes, interest income on those assets can increase soon after a rate rise. Ladder’s dividend yield is approximately 9.6% ahead of the Fed meeting.

Higher benchmark rates raise interest income on assets tied to reference rates. Firms that combine floating‑rate assets with liability structures that limit funding cost volatility report that their net interest margins can respond differently to policy moves, depending on the mix of loans, securities and funding sources disclosed in their filings.