Hunt Companies Finance Trust (NYSE:HCFT) and Preferred Apartment Communities (NYSE:APTS) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, earnings, dividends and risk.

Dividends

Hunt Companies Finance Trust pays an annual dividend of $0.28 per share and has a dividend yield of 8.5%. Preferred Apartment Communities pays an annual dividend of $1.04 per share and has a dividend yield of 6.6%. Hunt Companies Finance Trust pays out -90.3% of its earnings in the form of a dividend. Preferred Apartment Communities pays out 73.8% 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. Preferred Apartment Communities has increased its dividend for 3 consecutive years. Hunt Companies Finance Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Hunt Companies Finance Trust has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Preferred Apartment Communities has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500.

Valuation and Earnings

This table compares Hunt Companies Finance Trust and Preferred Apartment Communities’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hunt Companies Finance Trust $58.96 million 1.32 -$5.47 million ($0.31) -10.58
Preferred Apartment Communities $397.27 million 1.71 $43.47 million $1.41 11.09

Preferred Apartment Communities has higher revenue and earnings than Hunt Companies Finance Trust. Hunt Companies Finance Trust is trading at a lower price-to-earnings ratio than Preferred Apartment Communities, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Hunt Companies Finance Trust and Preferred Apartment Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hunt Companies Finance Trust -34.23% 8.04% 1.46%
Preferred Apartment Communities 6.41% 1.71% 0.62%

Institutional & Insider Ownership

37.9% of Hunt Companies Finance Trust shares are held by institutional investors. Comparatively, 60.5% of Preferred Apartment Communities shares are held by institutional investors. 0.9% of Hunt Companies Finance Trust shares are held by company insiders. Comparatively, 1.6% of Preferred Apartment Communities shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and price targets for Hunt Companies Finance Trust and Preferred Apartment Communities, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hunt Companies Finance Trust 0 0 1 0 3.00
Preferred Apartment Communities 0 1 2 0 2.67

Hunt Companies Finance Trust currently has a consensus price target of $3.75, indicating a potential upside of 14.33%. Preferred Apartment Communities has a consensus price target of $20.00, indicating a potential upside of 27.88%. Given Preferred Apartment Communities’ higher probable upside, analysts plainly believe Preferred Apartment Communities is more favorable than Hunt Companies Finance Trust.

Summary

Preferred Apartment Communities beats Hunt Companies Finance Trust on 11 of the 17 factors compared between the two stocks.

Hunt Companies Finance Trust Company Profile

Hunt Companies Finance Trust, Inc., a real estate specialty finance company, focuses on investing in portfolio mortgage-backed securities (MBS), mortgages, and other real estate related assets. It invests in agency and non-agency residential MBS, multi-family MBS, mortgage-servicing rights, and other mortgage-related investments. The company is qualified as a real estate investment trust (REIT) under the Internal Revenue Code. 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 Five Oaks Investment Corp. and changed its name to Hunt Companies Finance Trust, Inc. in May 2018. Hunt Companies Finance Trust, Inc. was founded in 2012 and is headquartered in New York, New York.

Preferred Apartment Communities Company Profile

Preferred Apartment Communities, Inc. is a Maryland corporation formed primarily to own and operate multifamily properties and, to a lesser extent, own and operate student housing properties, grocery-anchored shopping centers and strategically located, well leased class A office buildings, all in select targeted markets throughout the United States. As part of our business strategy, we may enter into forward purchase contracts or purchase options for to-be-built multifamily communities and we may make real estate related loans, provide deposit arrangements, or provide performance assurances, as may be necessary or appropriate, in connection with the development of multifamily communities. As a secondary strategy, we may acquire or originate senior mortgage loans, subordinate loans or real estate loans secured by interests in multifamily properties, membership or partnership interests in multifamily properties and other multifamily related assets and invest a lesser portion of our assets in other real estate related investments, including other income-producing property types, senior mortgage loans, subordinate loans or real estate loans secured by interests in other income-producing property types, membership or partnership interests in other income-producing property types as determined by our manager as appropriate for us. At March 31, 2019, the Company was the approximate 97.9% owner of Preferred Apartment Communities Operating Partnership, L.P., the Company's operating partnership. Preferred Apartment Communities, Inc. has elected to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended, commencing with its tax year ended December 31, 2011.

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