Capital Trust (NYSE: BXMT) and Ares Commercial Real Estate Corporation (NYSE:ACRE) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, earnings, risk and institutional ownership.

Insider & Institutional Ownership

61.9% of Capital Trust shares are held by institutional investors. Comparatively, 65.2% of Ares Commercial Real Estate Corporation shares are held by institutional investors. 0.9% of Capital Trust shares are held by insiders. Comparatively, 1.8% of Ares Commercial Real Estate Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Capital Trust and Ares Commercial Real Estate Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Trust 55.05% 8.76% 2.43%
Ares Commercial Real Estate Corporation 45.06% 7.07% 2.03%

Dividends

Capital Trust pays an annual dividend of $2.48 per share and has a dividend yield of 8.1%. Ares Commercial Real Estate Corporation pays an annual dividend of $1.08 per share and has a dividend yield of 8.3%. Capital Trust pays out 106.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate Corporation pays out 77.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate Corporation has increased its dividend for 3 consecutive years. Ares Commercial Real Estate Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings for Capital Trust and Ares Commercial Real Estate Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Trust 0 3 3 0 2.50
Ares Commercial Real Estate Corporation 1 2 3 0 2.33

Capital Trust presently has a consensus price target of $33.50, suggesting a potential upside of 9.12%. Ares Commercial Real Estate Corporation has a consensus price target of $14.31, suggesting a potential upside of 10.01%. Given Ares Commercial Real Estate Corporation’s higher probable upside, analysts clearly believe Ares Commercial Real Estate Corporation is more favorable than Capital Trust.

Risk and Volatility

Capital Trust has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate Corporation has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Earnings and Valuation

This table compares Capital Trust and Ares Commercial Real Estate Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capital Trust $298.97 million 9.74 $220.95 million $2.33 13.18
Ares Commercial Real Estate Corporation $45.12 million 8.23 $39.98 million $1.40 9.29

Capital Trust has higher revenue and earnings than Ares Commercial Real Estate Corporation. Ares Commercial Real Estate Corporation is trading at a lower price-to-earnings ratio than Capital Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Capital Trust beats Ares Commercial Real Estate Corporation on 10 of the 16 factors compared between the two stocks.

About Capital Trust

Blackstone Mortgage Trust, Inc. is a holding company. The Company conducts its operations as a real estate investment trust for the United States federal income tax purposes. The Company originates and purchases senior loans collateralized by properties in North America and Europe. The Company’s business is focused on originating or acquiring senior, floating rate mortgage loans that are secured by a first priority mortgage on commercial real estate assets primarily in the office, lodging, retail, residential and industrial sectors. These investments may be in the form of whole loans or may also include pari passu participations within mortgage loans. It directly originates, co-originates and acquires debt instruments in conjunction with acquisitions, refinancings and recapitalizations of commercial real estate. The Company’s manager is BXMT Advisors L.L.C.

About Ares Commercial Real Estate Corporation

Ares Commercial Real Estate Corporation is a specialty finance company. The Company is primarily engaged in originating and investing in commercial real estate (CRE) loans and related investments. The Company operates through principal lending segment. Its target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investment opportunities, including commercial mortgage-backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior-living, self-storage and other commercial real estate properties, or by ownership interests therein. Through the Company’s manager, Ares Commercial Real Estate Management LLC, it has investment professionals located across the United States and Europe who directly source loan opportunities for the Company with owners, operators and sponsors of CRE properties.

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