Chimera Investment (NYSE: CIM) and Ares Commercial Real Estate (NYSE:ACRE) are both financials 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.
Chimera Investment pays an annual dividend of $2.00 per share and has a dividend yield of 12.3%. Ares Commercial Real Estate pays an annual dividend of $1.08 per share and has a dividend yield of 8.9%. Chimera Investment pays out 61.5% of its earnings in the form of a dividend. Ares Commercial Real Estate pays out 95.6% 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 has increased its dividend for 2 consecutive years and Ares Commercial Real Estate has increased its dividend for 3 consecutive years. Chimera Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk & Volatility
Chimera Investment has a beta of 0.67, meaning that its share price is 33% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.
Earnings and Valuation
This table compares Chimera Investment and Ares Commercial Real Estate’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Chimera Investment||$934.07 million||3.26||$551.94 million||$3.25||5.00|
|Ares Commercial Real Estate||$81.96 million||4.23||$40.33 million||$1.13||10.74|
Chimera Investment has higher revenue and earnings than Ares Commercial Real Estate. Chimera Investment 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.
This table compares Chimera Investment 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||33.69%||7.76%||2.16%|
Institutional & Insider Ownership
50.3% of Chimera Investment shares are held by institutional investors. Comparatively, 63.1% of Ares Commercial Real Estate shares are held by institutional investors. 0.7% of Chimera Investment shares are held by company insiders. Comparatively, 1.8% of Ares Commercial Real Estate 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.
This is a summary of current ratings and price targets for Chimera Investment and Ares Commercial Real Estate, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Ares Commercial Real Estate||0||2||2||0||2.50|
Chimera Investment currently has a consensus price target of $18.88, indicating a potential upside of 16.23%. Ares Commercial Real Estate has a consensus price target of $14.17, indicating a potential upside of 16.69%. Given Ares Commercial Real Estate’s stronger consensus rating and higher probable upside, analysts plainly believe Ares Commercial Real Estate is more favorable than Chimera Investment.
Chimera Investment beats Ares Commercial Real Estate on 9 of the 16 factors compared between the two stocks.
About Chimera Investment
Chimera Investment Corporation is a real estate investment trust (REIT). The company is engaged in the business of investing in a portfolio of mortgage assets, including agency residential mortgage-backed security (RMBS), non-agency RMBS, agency commercial mortgage-backed securities (CMBS), residential mortgage loans and real estate related securities. The Company’s objective is to provide risk-adjusted returns to its investors over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses to achieve this objective by investing in an investment portfolio of RMBS, agency CMBS, residential mortgage loans, commercial mortgage loans, real estate-related securities and various other asset classes. The MBS and real estate-related securities the Company purchases include investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes. It also invests in investment grade and non-investment grade RMBS.
About Ares Commercial Real Estate
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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