Arlington Asset Investment Corp (AI) and Brookfield Asset Management (BAM) Critical Review

Arlington Asset Investment Corp (NYSE: AI) and Brookfield Asset Management (NYSE:BAM) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Arlington Asset Investment Corp and Brookfield Asset Management, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arlington Asset Investment Corp 0 2 2 0 2.50
Brookfield Asset Management 0 1 7 0 2.88

Arlington Asset Investment Corp presently has a consensus target price of $14.94, indicating a potential upside of 16.34%. Brookfield Asset Management has a consensus target price of $43.56, indicating a potential upside of 11.58%. Given Arlington Asset Investment Corp’s higher probable upside, equities research analysts clearly believe Arlington Asset Investment Corp is more favorable than Brookfield Asset Management.

Risk and Volatility

Arlington Asset Investment Corp has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, Brookfield Asset Management has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Earnings and Valuation

This table compares Arlington Asset Investment Corp and Brookfield Asset Management’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arlington Asset Investment Corp $45.40 million 7.34 -$38.93 million ($1.50) -8.56
Brookfield Asset Management $30.02 billion 1.25 $8.47 billion $1.28 30.50

Brookfield Asset Management has higher revenue and earnings than Arlington Asset Investment Corp. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Brookfield Asset Management, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

38.6% of Arlington Asset Investment Corp shares are held by institutional investors. Comparatively, 53.8% of Brookfield Asset Management shares are held by institutional investors. 2.7% of Arlington Asset Investment Corp shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 17.1%. Brookfield Asset Management pays an annual dividend of $0.56 per share and has a dividend yield of 1.4%. Arlington Asset Investment Corp pays out -146.7% of its earnings in the form of a dividend. Brookfield Asset Management pays out 43.8% 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. Brookfield Asset Management has increased its dividend for 5 consecutive years. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Arlington Asset Investment Corp and Brookfield Asset Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arlington Asset Investment Corp -33.84% -10.44% -0.93%
Brookfield Asset Management 4.87% 2.10% 0.84%

Summary

Brookfield Asset Management beats Arlington Asset Investment Corp on 10 of the 16 factors compared between the two stocks.

About Arlington Asset Investment Corp

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

About Brookfield Asset Management

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

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