Comparing Arbor Realty Trust (NYSE:ABR) and Ellington Financial (NYSE:EFC)

Ellington Financial (NYSE:EFC) and Arbor Realty Trust (NYSE:ABR) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, dividends, profitability, earnings, valuation, institutional ownership and analyst recommendations.

Dividends

Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.3%. Arbor Realty Trust pays an annual dividend of $1.20 per share and has a dividend yield of 15.0%. Ellington Financial pays out 116.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. 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.

Institutional & Insider Ownership

55.6% of Ellington Financial shares are owned by institutional investors. Comparatively, 57.3% of Arbor Realty Trust shares are owned by institutional investors. 4.1% of Ellington Financial shares are owned by insiders. Comparatively, 3.8% of Arbor Realty Trust shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ellington Financial	89.04%	14.55%	1.15%
Arbor Realty Trust	20.07%	11.63%	2.13%

Analyst Ratings

This is a summary of recent ratings and price targets for Ellington Financial and Arbor Realty Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	3	5	0	2.63
Arbor Realty Trust	4	2	1	0	1.57

Ellington Financial currently has a consensus price target of $14.46, indicating a potential upside of 4.40%. Arbor Realty Trust has a consensus price target of $9.63, indicating a potential upside of 20.69%. Given Arbor Realty Trust’s higher possible upside, analysts plainly believe Arbor Realty Trust is more favorable than Ellington Financial.

Risk & Volatility

Ellington Financial has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, Arbor Realty Trust has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500.

Valuation & Earnings

This table compares Ellington Financial and Arbor Realty Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$136.41 million	11.29	$145.86 million	$1.34	10.34
Arbor Realty Trust	$1.17 billion	1.34	$264.64 million	$0.80	9.97

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

Summary

Ellington Financial beats Arbor Realty Trust on 9 of the 16 factors compared between the two stocks.

About Ellington Financial

Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets. 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. Ellington Financial LLC was incorporated in 2007 and is headquartered in Old Greenwich, Connecticut.

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.