CYS Investments (NYSE: CYS) and Ares Commercial Real Estate (NYSE:ACRE) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, profitability, institutional ownership and earnings.
CYS Investments pays an annual dividend of $1.00 per share and has a dividend yield of 15.4%. Ares Commercial Real Estate pays an annual dividend of $1.08 per share and has a dividend yield of 8.7%. CYS Investments pays out 95.2% 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 pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CYS Investments has raised its dividend for 2 consecutive years. CYS Investments is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
61.4% of CYS Investments shares are owned by institutional investors. Comparatively, 63.2% of Ares Commercial Real Estate shares are owned by institutional investors. 1.0% of CYS Investments shares are owned by company insiders. Comparatively, 1.8% of Ares Commercial Real Estate shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
This is a summary of recent recommendations and price targets for CYS Investments and Ares Commercial Real Estate, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Ares Commercial Real Estate||0||2||2||0||2.50|
CYS Investments currently has a consensus price target of $8.50, indicating a potential upside of 30.97%. Ares Commercial Real Estate has a consensus price target of $14.17, indicating a potential upside of 14.34%. Given CYS Investments’ higher possible upside, analysts clearly believe CYS Investments is more favorable than Ares Commercial Real Estate.
This table compares CYS Investments and Ares Commercial Real Estate’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Ares Commercial Real Estate||31.17%||7.54%||1.96%|
Volatility & Risk
CYS Investments has a beta of 0.42, suggesting that its stock price is 58% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500.
Valuation and Earnings
This table compares CYS Investments and Ares Commercial Real Estate’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|CYS Investments||$318.87 million||3.16||$181.26 million||$1.05||6.18|
|Ares Commercial Real Estate||$97.54 million||3.63||$30.41 million||$1.08||11.47|
CYS Investments has higher revenue and earnings than Ares Commercial Real Estate. CYS Investments is trading at a lower price-to-earnings ratio than Ares Commercial Real Estate, indicating that it is currently the more affordable of the two stocks.
Ares Commercial Real Estate beats CYS Investments on 9 of the 17 factors compared between the two stocks.
CYS Investments Company Profile
CYS Investments, Inc. is a specialty finance company. The Company’s objective is to provide consistent returns to its investors through a combination of dividends and capital appreciation. It invests in agency residential mortgage-backed security (RMBS) collateralized by fixed rate single-family residential mortgage loans; adjustable-rate mortgages (ARMs), which have coupon rates that reset monthly, or hybrid ARMs, which have a coupon rate that is fixed for an initial period. In addition, it has investments in collateralized mortgage obligations issued by a government agency or government-sponsored entity (GSE) that are collateralized by Agency RMBS. Its investments consist of residential mortgage pass-through securities for which the principal and interest payments are guaranteed by a GSE, such as Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, or by the United States Government agency, such as Government National Mortgage Association.
Ares Commercial Real Estate Company Profile
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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