Head to Head Comparison: Two Harbors Investments (NYSE:TWO) vs. Arbor Realty Trust (NYSE:ABR)

Arbor Realty Trust (NYSE:ABR) and Two Harbors Investments (NYSE:TWO) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, valuation, risk, profitability, earnings and analyst recommendations.

Dividends

Arbor Realty Trust pays an annual dividend of $1.20 per share and has a dividend yield of 10.6%. Two Harbors Investments pays an annual dividend of $1.56 per share and has a dividend yield of 15.2%. Arbor Realty Trust pays out 115.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments pays out -305.9% of its earnings in the form of a dividend. Two Harbors Investments has increased its dividend for 1 consecutive years. Two Harbors Investments is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current ratings for Arbor Realty Trust and Two Harbors Investments, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arbor Realty Trust	2	2	1	0	1.80
Two Harbors Investments	0	5	3	0	2.38

Arbor Realty Trust currently has a consensus target price of $13.20, indicating a potential upside of 16.76%. Two Harbors Investments has a consensus target price of $13.00, indicating a potential upside of 27.06%. Given Two Harbors Investments’ stronger consensus rating and higher probable upside, analysts plainly believe Two Harbors Investments is more favorable than Arbor Realty Trust.

Volatility & Risk

Arbor Realty Trust has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500. Comparatively, Two Harbors Investments has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500.

Earnings and Valuation

This table compares Arbor Realty Trust and Two Harbors Investments”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	1.86	$264.64 million	$1.04	10.87
Two Harbors Investments	$216.08 million	4.93	$298.17 million	($0.51)	-20.06

Two Harbors Investments has lower revenue, but higher earnings than Arbor Realty Trust. Two Harbors Investments 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.

Profitability

This table compares Arbor Realty Trust and Two Harbors Investments’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arbor Realty Trust	21.82%	13.29%	2.44%
Two Harbors Investments	3.50%	8.06%	0.97%

Institutional and Insider Ownership

57.3% of Arbor Realty Trust shares are held by institutional investors. Comparatively, 64.2% of Two Harbors Investments shares are held by institutional investors. 3.8% of Arbor Realty Trust shares are held by insiders. Comparatively, 0.7% of Two Harbors Investments shares are held by 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.

Summary

Two Harbors Investments beats Arbor Realty Trust on 9 of the 17 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 Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.