Critical Review: Lument Finance Trust (NYSE:LFT) & Apollo Commercial Real Estate Finance (NYSE:ARI)

Apollo Commercial Real Estate Finance (NYSE:ARI) and Lument Finance Trust (NYSE:LFT) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Volatility and Risk

Apollo Commercial Real Estate Finance has a beta of 1.4, indicating that its share price is 40% more volatile than the S&P 500. Comparatively, Lument Finance Trust has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Apollo Commercial Real Estate Finance and Lument Finance Trust, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Apollo Commercial Real Estate Finance	1	3	2	0	2.17
Lument Finance Trust	1	0	0	0	1.00

Apollo Commercial Real Estate Finance currently has a consensus target price of $11.33, indicating a potential upside of 71.82%. Given Apollo Commercial Real Estate Finance’s stronger consensus rating and higher probable upside, analysts clearly believe Apollo Commercial Real Estate Finance is more favorable than Lument Finance Trust.

Earnings & Valuation

This table compares Apollo Commercial Real Estate Finance and Lument Finance Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Apollo Commercial Real Estate Finance	-$85.39 million	-9.93	$102.84 million	$0.80	8.24
Lument Finance Trust	$16.04 million	1.38	-$18.90 million	($3.60)	-1.17

Apollo Commercial Real Estate Finance has higher earnings, but lower revenue than Lument Finance Trust. Lument Finance Trust is trading at a lower price-to-earnings ratio than Apollo Commercial Real Estate Finance, indicating that it is currently the more affordable of the two stocks.

Dividends

Apollo Commercial Real Estate Finance pays an annual dividend of $1.00 per share and has a dividend yield of 15.2%. Lument Finance Trust pays an annual dividend of $1.60 per share and has a dividend yield of 38.0%. Apollo Commercial Real Estate Finance pays out 125.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Lument Finance Trust pays out -44.4% of its earnings in the form of a dividend. Lument Finance Trust has increased its dividend for 2 consecutive years. Lument Finance Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

54.4% of Apollo Commercial Real Estate Finance shares are owned by institutional investors. Comparatively, 19.5% of Lument Finance Trust shares are owned by institutional investors. 0.5% of Apollo Commercial Real Estate Finance shares are owned by insiders. Comparatively, 3.3% of Lument Finance Trust shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Apollo Commercial Real Estate Finance and Lument Finance Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Apollo Commercial Real Estate Finance	N/A	N/A	N/A
Lument Finance Trust	N/A	N/A	N/A

Summary

Apollo Commercial Real Estate Finance beats Lument Finance Trust on 8 of the 14 factors compared between the two stocks.

About Apollo Commercial Real Estate Finance

Apollo Commercial Real Estate Finance, Inc. operates as a real estate investment trust (REIT) that originates, acquires, invests in, and manages commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments in the United States, the United Kingdom, and Europe. It is qualified as a REIT under the Internal Revenue Code. As a REIT, it would not be subject to federal income taxes, if the company distributes at least 90% of its REIT taxable income to its stockholders. Apollo Commercial Real Estate Finance, Inc. was incorporated in 2009 and is based in New York, New York.

About Lument Finance Trust

Lument Finance Trust, Inc., a real estate investment trust, focuses on investing in, financing, and managing a portfolio of commercial real estate (CRE) debt investments in the United States. The company primarily invests in transitional floating rate CRE mortgage loans on middle market multi-family assets; and other CRE -related investments, including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans, and other CRE debt instruments. Lument Finance Trust, Inc. is qualified as a real estate investment trust (REIT) under the Internal Revenue Code of 1986. As a REIT, it would not be subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Hunt Companies Finance Trust, Inc. and changed its name to Lument Finance Trust, Inc. in December 2020. Lument Finance Trust, Inc. was incorporated in 2012 and is headquartered in New York, New York.