Reviewing First Potomac Realty Trust (FPO) & RAIT Financial Trust (RAS)
First Potomac Realty Trust (NYSE: FPO) and RAIT Financial Trust (NYSE:RAS) are both small-cap financials companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.
First Potomac Realty Trust pays an annual dividend of $0.40 per share and has a dividend yield of 3.6%. RAIT Financial Trust pays an annual dividend of $0.20 per share and has a dividend yield of 36.8%. First Potomac Realty Trust pays out 58.0% of its earnings in the form of a dividend. RAIT Financial Trust pays out -13.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. RAIT Financial Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.
Institutional and Insider Ownership
93.1% of First Potomac Realty Trust shares are held by institutional investors. Comparatively, 59.9% of RAIT Financial Trust shares are held by institutional investors. 2.1% of First Potomac Realty Trust shares are held by insiders. Comparatively, 1.3% of RAIT Financial Trust shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Valuation & Earnings
This table compares First Potomac Realty Trust and RAIT Financial Trust’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|First Potomac Realty Trust||$154.33 million||4.24||$83.35 million||$0.69||16.16|
|RAIT Financial Trust||$58.82 million||0.86||-$143.38 million||($1.54)||-0.35|
First Potomac Realty Trust has higher revenue and earnings than RAIT Financial Trust. RAIT Financial Trust is trading at a lower price-to-earnings ratio than First Potomac Realty Trust, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of current ratings and price targets for First Potomac Realty Trust and RAIT Financial Trust, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|First Potomac Realty Trust||2||2||1||0||1.80|
|RAIT Financial Trust||1||2||0||0||1.67|
First Potomac Realty Trust presently has a consensus price target of $11.03, suggesting a potential downside of 1.08%. RAIT Financial Trust has a consensus price target of $1.43, suggesting a potential upside of 162.43%. Given RAIT Financial Trust’s higher possible upside, analysts clearly believe RAIT Financial Trust is more favorable than First Potomac Realty Trust.
This table compares First Potomac Realty Trust and RAIT Financial Trust’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|First Potomac Realty Trust||-7.99%||-2.35%||-0.94%|
|RAIT Financial Trust||-99.46%||0.98%||0.15%|
Volatility and Risk
First Potomac Realty Trust has a beta of 0.8, suggesting that its stock price is 20% less volatile than the S&P 500. Comparatively, RAIT Financial Trust has a beta of 1.63, suggesting that its stock price is 63% more volatile than the S&P 500.
First Potomac Realty Trust beats RAIT Financial Trust on 9 of the 15 factors compared between the two stocks.
First Potomac Realty Trust Company Profile
First Potomac Realty Trust (First Potomac) is engaged in ownership, management, redevelopment and development of office and business park properties in the greater Washington, D.C. region. The Company’s segments include Washington, D.C., Maryland, Northern Virginia and Southern Virginia. The Company conducts its business through First Potomac Realty Investment Limited Partnership, its operating partnership. The Company’s portfolio consist a mix of single-tenant and multi-tenant office properties, and business parks. The office properties are single-story and multi-story buildings that are primarily for office uses, and business parks consists of buildings with office features combined with some industrial property space. As of December 31, 2016, the Company owned properties totaling 6.7 million square feet and had a non-controlling ownership interest in properties totaling an additional 0.9 million square feet through five unconsolidated joint ventures.
RAIT Financial Trust Company Profile
RAIT Financial Trust (RAIT) is a real estate investment trust (REIT). The Company focuses on providing commercial real estate (CRE) financing throughout the United States. The core of its business is a full service CRE lending platform focused on first lien loans. It offers customized lending solutions to meet borrower needs and internal credit goals. It offers personalized middle-market financing solutions and a complement of lending products for CRE. The Company may also offer mezzanine loans and preferred equity interests in limited circumstances to support first lien loans. It is engaged in floating rate securitization programs and has access to multiple sources of funding, including senior debt, convertible securities, preferred securities and common securities. The Company also owns and manages a portfolio of CRE properties, and manages real estate assets for third parties. The Company is engaged in lending, owning and managing CRE assets throughout the United States.
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