Analyzing NexPoint Real Estate Finance (NYSE:NREF) & Arbor Realty Trust (NYSE:ABR)

Arbor Realty Trust (NYSE:ABR) and NexPoint Real Estate Finance (NYSE:NREF) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, earnings, profitability, institutional ownership, dividends and analyst recommendations.

Earnings and Valuation

This table compares Arbor Realty Trust and NexPoint Real Estate Finance”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arbor Realty Trust	$523.90 million	3.45	$264.64 million	$0.80	11.53
NexPoint Real Estate Finance	$72.51 million	3.27	$29.19 million	$2.81	4.76

Arbor Realty Trust has higher revenue and earnings than NexPoint Real Estate Finance. NexPoint Real Estate Finance is trading at a lower price-to-earnings ratio than Arbor Realty Trust, indicating that it is currently the more affordable of the two stocks.

Dividends

Arbor Realty Trust pays an annual dividend of $1.20 per share and has a dividend yield of 13.0%. NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 14.9%. Arbor Realty Trust pays out 150.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Real Estate Finance pays out 71.2% of its earnings in the form of a dividend. NexPoint Real Estate Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings for Arbor Realty Trust and NexPoint Real Estate Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arbor Realty Trust	2	4	1	0	1.86
NexPoint Real Estate Finance	1	3	0	0	1.75

Arbor Realty Trust currently has a consensus price target of $11.00, indicating a potential upside of 19.23%. NexPoint Real Estate Finance has a consensus price target of $14.75, indicating a potential upside of 10.20%. Given Arbor Realty Trust’s stronger consensus rating and higher probable upside, research analysts plainly believe Arbor Realty Trust is more favorable than NexPoint Real Estate Finance.

Volatility & Risk

Arbor Realty Trust has a beta of 1.38, meaning that its stock price is 38% more volatile than the S&P 500. Comparatively, NexPoint Real Estate Finance has a beta of 1.26, meaning that its stock price is 26% more volatile than the S&P 500.

Insider & Institutional Ownership

57.3% of Arbor Realty Trust shares are owned by institutional investors. Comparatively, 67.8% of NexPoint Real Estate Finance shares are owned by institutional investors. 3.8% of Arbor Realty Trust shares are owned by insiders. Comparatively, 55.7% of NexPoint Real Estate Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Arbor Realty Trust and NexPoint Real Estate Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arbor Realty Trust	20.75%	12.26%	2.26%
NexPoint Real Estate Finance	102.28%	17.94%	1.14%

Summary

Arbor Realty Trust beats NexPoint Real Estate Finance on 9 of the 16 factors compared between the two stocks.

About Arbor Realty Trust

Arbor Realty Trust, Inc. invests in a diversified portfolio of structured finance assets in the multifamily, single-family rental, and commercial real estate markets in the United States. The company operates through Structured Business and Agency Business segments. It primarily invests in bridge and mezzanine loans, including junior participating interests in first mortgages, and preferred and direct equity, as well as real estate-related joint ventures, real estate-related notes, and various mortgage-related securities. In addition, the company offers bridge financing products to borrowers who seek short-term capital to be used in an acquisition of property; financing by making preferred equity investments in entities that directly or indirectly own real property; mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction; junior participation financing in the form of a junior participating interest in the senior debt; and financing products to borrowers who are looking to acquire conventional, workforce, and affordable single-family housing. Further, it underwrites, originates, sells, and services multifamily mortgage loans through conduit/commercial mortgage-backed securities programs. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Arbor Realty Trust, Inc. was incorporated in 2003 and is headquartered in Uniondale, New York.

About NexPoint Real Estate Finance

NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.