Arlington Asset Investment Corp (NYSE: AI) and Fortress Investment Group (NYSE:FIG) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their dividends, risk, earnings, institutional ownership, profitability, valuation and analyst recommendations.

Earnings & Valuation

This table compares Arlington Asset Investment Corp and Fortress Investment Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arlington Asset Investment Corp $45.40 million 7.32 -$38.93 million ($1.50) -8.54
Fortress Investment Group $950.66 million 1.84 $273.52 million $0.44 18.16

Fortress Investment Group has higher revenue and earnings than Arlington Asset Investment Corp. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Fortress Investment Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 17.2%. Fortress Investment Group pays an annual dividend of $0.36 per share and has a dividend yield of 4.5%. Arlington Asset Investment Corp pays out -146.7% of its earnings in the form of a dividend. Fortress Investment Group pays out 81.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

38.6% of Arlington Asset Investment Corp shares are held by institutional investors. Comparatively, 40.2% of Fortress Investment Group shares are held by institutional investors. 2.7% of Arlington Asset Investment Corp shares are held by company insiders. Comparatively, 45.2% of Fortress Investment Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Arlington Asset Investment Corp and Fortress Investment Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arlington Asset Investment Corp -33.84% -10.44% -0.93%
Fortress Investment Group 10.61% 38.79% 15.58%

Analyst Ratings

This is a summary of recent ratings and recommmendations for Arlington Asset Investment Corp and Fortress Investment Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arlington Asset Investment Corp 0 2 2 0 2.50
Fortress Investment Group 0 4 0 0 2.00

Arlington Asset Investment Corp currently has a consensus price target of $14.94, indicating a potential upside of 16.61%. Fortress Investment Group has a consensus price target of $6.00, indicating a potential downside of 24.91%. Given Arlington Asset Investment Corp’s stronger consensus rating and higher probable upside, research analysts clearly believe Arlington Asset Investment Corp is more favorable than Fortress Investment Group.

Volatility and Risk

Arlington Asset Investment Corp has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500. Comparatively, Fortress Investment Group has a beta of 1.95, indicating that its share price is 95% more volatile than the S&P 500.

Summary

Fortress Investment Group beats Arlington Asset Investment Corp on 9 of the 15 factors compared between the two stocks.

About Arlington Asset Investment Corp

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

About Fortress Investment Group

Fortress Investment Group LLC (Fortress) is an investment management firm. The Company operates through segments, including private equity funds, permanent capital vehicles, credit hedge funds, credit PE funds, liquid hedge funds and Logan Circle. Its business is to sponsor the formation of, and provide investment management services for, various investment funds, permanent capital vehicles and related managed accounts (the Fortress Funds). Fortress’s sources of income from the Fortress Funds are management fees, incentive income and investment income on its investments in the funds. As of December 31, 2016, the Company’s private equity business manages approximately $13.5 billion of assets under management (AUM); credit funds business manages approximately $18.1 billion of AUM; liquid hedge funds business manages over $4.6 billion of AUM, and Logan Circle business manages approximately $33.4 billion of AUM.

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