KKR Real Estate Finance Trust (NYSE: KREF) and Great Ajax (NYSE:AJX) are both small-cap financials companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, profitability, analyst recommendations, institutional ownership and valuation.

Insider & Institutional Ownership

65.7% of KKR Real Estate Finance Trust shares are held by institutional investors. Comparatively, 71.4% of Great Ajax shares are held by institutional investors. 3.8% of Great Ajax shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares KKR Real Estate Finance Trust and Great Ajax’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KKR Real Estate Finance Trust 62.19% 6.54% 1.04%
Great Ajax 55.23% 10.04% 2.77%

Analyst Ratings

This is a breakdown of current recommendations and price targets for KKR Real Estate Finance Trust and Great Ajax, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KKR Real Estate Finance Trust 0 3 0 0 2.00
Great Ajax 0 1 3 0 2.75

KKR Real Estate Finance Trust currently has a consensus price target of $22.50, suggesting a potential upside of 13.52%. Great Ajax has a consensus price target of $14.75, suggesting a potential upside of 6.27%. Given KKR Real Estate Finance Trust’s higher possible upside, equities analysts plainly believe KKR Real Estate Finance Trust is more favorable than Great Ajax.

Valuation and Earnings

This table compares KKR Real Estate Finance Trust and Great Ajax’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KKR Real Estate Finance Trust $41.19 million 25.83 $31.15 million N/A N/A
Great Ajax $44.69 million 5.67 $27.83 million $1.53 9.07

KKR Real Estate Finance Trust has higher earnings, but lower revenue than Great Ajax.

Dividends

KKR Real Estate Finance Trust pays an annual dividend of $1.48 per share and has a dividend yield of 7.5%. Great Ajax pays an annual dividend of $1.20 per share and has a dividend yield of 8.6%. Great Ajax pays out 78.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Great Ajax has raised its dividend for 2 consecutive years. Great Ajax is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Great Ajax beats KKR Real Estate Finance Trust on 9 of the 14 factors compared between the two stocks.

KKR Real Estate Finance Trust Company Profile

KKR Real Estate Finance Trust Inc is a real estate finance company that focuses primarily on originating and acquiring senior mortgage loans secured by commercial real estate assets (CRE). KKR manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. The Company’s investment strategy is to originate or acquire senior mortgage loans collateralized by institutional-quality CRE assets. Its target assets also include mezzanine loans, preferred equity and other debt-oriented instruments. The Company’s investment objective is capital preservation and generating attractive risk-adjusted returns for its stockholders over the long term, primarily through dividends.

Great Ajax Company Profile

Great Ajax Corp. is an externally managed real estate company. The Company is focused on acquiring, investing in and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. Its segment is focused on non-performing mortgages and re-performing mortgages. It also invests in loans secured by multi-family residential and commercial mixed use retail/residential properties, as well as in the properties directly. It also holds real estate-owned properties (REO) acquired upon the foreclosure or other settlement of its owned non-performing loans, as well as through outright purchases. It is managed by Thetis Asset Management LLC, an affiliated entity. Its mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. The Company conducts its business through its operating partnership, Great Ajax Operating Partnership L.P.

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