Reviewing Arbor Realty Trust (NYSE:ABR) and Ellington Credit (NYSE:EARN)

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

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Credit	$15.07 million	13.61	$6.59 million	$0.08	68.25
Arbor Realty Trust	$1.17 billion	1.29	$264.64 million	$0.80	9.63

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

Analyst Recommendations

This is a summary of current ratings for Ellington Credit and Arbor Realty Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Credit	0	1	1	0	2.50
Arbor Realty Trust	5	1	1	0	1.43

Ellington Credit presently has a consensus target price of $6.25, suggesting a potential upside of 14.47%. Arbor Realty Trust has a consensus target price of $9.38, suggesting a potential upside of 21.71%. Given Arbor Realty Trust’s higher probable upside, analysts plainly believe Arbor Realty Trust is more favorable than Ellington Credit.

Risk and Volatility

Ellington Credit has a beta of 1.28, meaning that its share price is 28% more volatile than the S&P 500. Comparatively, Arbor Realty Trust has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Insider and Institutional Ownership

20.4% of Ellington Credit shares are owned by institutional investors. Comparatively, 57.3% of Arbor Realty Trust shares are owned by institutional investors. 1.4% of Ellington Credit shares are owned by company insiders. Comparatively, 3.8% of Arbor Realty Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ellington Credit	12.41%	16.47%	3.87%
Arbor Realty Trust	20.07%	11.63%	2.13%

Dividends

Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 17.6%. Arbor Realty Trust pays an annual dividend of $1.20 per share and has a dividend yield of 15.6%. Ellington Credit pays out 1,200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. 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.

Summary

Arbor Realty Trust beats Ellington Credit on 9 of the 15 factors compared between the two stocks.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based 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.