Contrasting Chimera Investment (NYSE:CIM) and Arbor Realty Trust (NYSE:ABR)

Arbor Realty Trust (NYSE:ABR) and Chimera Investment (NYSE:CIM) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, risk, valuation, dividends, profitability, analyst recommendations and institutional ownership.

Institutional and Insider Ownership

57.3% of Arbor Realty Trust shares are held by institutional investors. Comparatively, 48.4% of Chimera Investment shares are held by institutional investors. 3.8% of Arbor Realty Trust shares are held by company insiders. Comparatively, 1.5% of Chimera Investment shares are held 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.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Arbor Realty Trust and Chimera Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arbor Realty Trust	4	2	1	0	1.57
Chimera Investment	1	3	1	0	2.00

Arbor Realty Trust presently has a consensus price target of $9.38, indicating a potential upside of 21.05%. Chimera Investment has a consensus price target of $14.50, indicating a potential upside of 11.27%. Given Arbor Realty Trust’s higher possible upside, research analysts plainly believe Arbor Realty Trust is more favorable than Chimera Investment.

Profitability

This table compares Arbor Realty Trust and Chimera Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arbor Realty Trust	20.07%	11.63%	2.13%
Chimera Investment	4.27%	7.36%	1.36%

Risk & Volatility

Arbor Realty Trust has a beta of 1.39, suggesting that its share price is 39% more volatile than the S&P 500. Comparatively, Chimera Investment has a beta of 1.83, suggesting that its share price is 83% more volatile than the S&P 500.

Earnings and Valuation

This table compares Arbor Realty Trust and Chimera Investment”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arbor Realty Trust	$1.17 billion	1.30	$264.64 million	$0.80	9.68
Chimera Investment	$760.95 million	1.42	$176.07 million	($0.40)	-32.58

Arbor Realty Trust has higher revenue and earnings than Chimera Investment. Chimera Investment 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 15.5%. Chimera Investment pays an annual dividend of $1.48 per share and has a dividend yield of 11.4%. 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. Chimera Investment pays out -370.0% of its earnings in the form of a dividend. Chimera Investment has increased its dividend for 1 consecutive years.

Summary

Arbor Realty Trust beats Chimera Investment on 11 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 Chimera Investment

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries, invests in a portfolio of mortgage assets, including residential mortgage loans, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, agency mortgage-backed securities secured by pools of commercial mortgage loans, business purpose and investor loans, and other real estate related securities. It invests in investment grade, non-investment grade, and non-rated classes. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Chimera Investment Corporation was incorporated in 2007 and is headquartered in New York, New York.