Investors Real Estate Trust (NYSE: IRET) and Arbor Realty Trust (NYSE:ABR) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, profitabiliy and valuation.

Risk and Volatility

Investors Real Estate Trust has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Arbor Realty Trust has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.

Profitability

This table compares Investors Real Estate Trust and Arbor Realty Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Investors Real Estate Trust 21.07% -2.51% -0.80%
Arbor Realty Trust 52.33% 10.63% 2.48%

Dividends

Investors Real Estate Trust pays an annual dividend of $0.28 per share and has a dividend yield of 4.5%. Arbor Realty Trust pays an annual dividend of $0.72 per share and has a dividend yield of 8.7%. Investors Real Estate Trust pays out 107.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Arbor Realty Trust pays out 64.9% of its earnings in the form of a dividend. Investors Real Estate Trust has raised its dividend for 5 consecutive years. Arbor Realty Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and price targets for Investors Real Estate Trust and Arbor Realty Trust, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Investors Real Estate Trust 0 2 1 0 2.33
Arbor Realty Trust 0 1 1 0 2.50

Investors Real Estate Trust presently has a consensus target price of $6.18, suggesting a potential downside of 1.38%. Arbor Realty Trust has a consensus target price of $8.88, suggesting a potential upside of 6.80%. Given Arbor Realty Trust’s stronger consensus rating and higher possible upside, analysts plainly believe Arbor Realty Trust is more favorable than Investors Real Estate Trust.

Earnings and Valuation

This table compares Investors Real Estate Trust and Arbor Realty Trust’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Investors Real Estate Trust $205.74 million 3.68 $99.75 million $0.26 24.12
Arbor Realty Trust $214.05 million 2.01 $57.55 million $1.11 7.49

Investors Real Estate Trust has higher revenue, but lower earnings than Arbor Realty Trust. Arbor Realty Trust is trading at a lower price-to-earnings ratio than Investors Real Estate Trust, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

52.9% of Investors Real Estate Trust shares are held by institutional investors. Comparatively, 36.8% of Arbor Realty Trust shares are held by institutional investors. 1.3% of Investors Real Estate Trust shares are held by company insiders. Comparatively, 15.3% of Arbor Realty Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Arbor Realty Trust beats Investors Real Estate Trust on 10 of the 16 factors compared between the two stocks.

About Investors Real Estate Trust

Investors Real Estate Trust is a self-advised equity real estate investment trust (REIT). The Company’s business consists of owning and operating income-producing real estate properties. Its segments include Multifamily, Healthcare and All Other. Its investments consist of multifamily and healthcare properties located primarily in the upper Midwest states of Minnesota and North Dakota. It conducts its business operations through its operating partnership, IRET Properties, which is principally engaged in acquiring, owning, operating and leasing real estate. It invests in multifamily properties and commercial properties that are leased to single or multiple tenants, usually for approximately five years or longer. As of May 26, 2017, the Company held for investment 86 multifamily properties containing 12,813 apartment units and 44 commercial properties, consisting of healthcare, industrial, office and retail, containing approximately 2.7 million square feet of leasable space.

About Arbor Realty Trust

Arbor Realty Trust, Inc. is a real estate investment trust. The Company invests in a portfolio of structured finance assets in the multifamily and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity. Its segments include Structured Business and Agency Business. In addition, the Company may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities. It focuses on investment types, such as Bridge Financing, Mezzanine Financing, Junior Participation Financing and Preferred Equity Investments. It offers bridge financing products to borrowers, typically seeking short-term capital to use in an acquisition of property. It offers mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction.

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