Preferred Apartment Communities (NYSE: APTS) and American Residential Properties (NYSE:ARPI) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, risk, analyst recommendations and profitability.

Profitability

This table compares Preferred Apartment Communities and American Residential Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Apartment Communities 10.49% 2.78% 1.08%
American Residential Properties -38.70% -9.17% -3.64%

Dividends

Preferred Apartment Communities pays an annual dividend of $1.00 per share and has a dividend yield of 5.9%. American Residential Properties pays an annual dividend of $0.40 per share and has a dividend yield of 2.5%. Preferred Apartment Communities pays out -99.0% of its earnings in the form of a dividend. American Residential Properties pays out -28.6% 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. Preferred Apartment Communities has increased its dividend for 2 consecutive years. Preferred Apartment Communities is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings for Preferred Apartment Communities and American Residential Properties, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Apartment Communities 0 3 2 0 2.40
American Residential Properties 0 0 0 0 N/A

Preferred Apartment Communities presently has a consensus price target of $19.80, suggesting a potential upside of 17.65%. Given Preferred Apartment Communities’ higher probable upside, equities analysts clearly believe Preferred Apartment Communities is more favorable than American Residential Properties.

Earnings & Valuation

This table compares Preferred Apartment Communities and American Residential Properties’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Apartment Communities $200.12 million 3.09 -$9.53 million ($1.01) -16.66
American Residential Properties N/A N/A N/A ($1.40) -11.35

American Residential Properties has lower revenue, but higher earnings than Preferred Apartment Communities. Preferred Apartment Communities is trading at a lower price-to-earnings ratio than American Residential Properties, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

52.0% of Preferred Apartment Communities shares are held by institutional investors. 3.1% of Preferred Apartment Communities 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

Preferred Apartment Communities beats American Residential Properties on 12 of the 13 factors compared between the two stocks.

About Preferred Apartment Communities

Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed to acquire and operate multifamily properties in select targeted markets throughout the United States. It operates through segments, including multifamily communities, real estate related financing, new market properties and office buildings. The multifamily communities segment consists of its portfolio of owned residential multifamily communities. The real estate related financing segment consists of the Company’s portfolio of real estate loans, bridge loans, and other instruments deployed by it to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets. The new market properties segment consists of its portfolio of grocery-anchored shopping centers. The office buildings segment consists of its office buildings located in Atlanta, Georgia and Birmingham, Alabama and Texas.

About American Residential Properties

American Residential Properties, Inc. is an internally managed real estate investment company, which is organized as a real estate investment trust. The Company acquires, owns, renovates, and manages single-family homes as rental properties. American Residential Properties OP, L.P. acts as its operating partnership. American Residential Leasing Company, LLC is a wholly owned subsidiary of its operating partnership. The Company owns 8,893 properties in Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Nevada, North Carolina, Ohio, South Carolina, Tennessee and Texas that were 81% leased, and it managed an additional 437 properties for ARP Phoenix Fund I, LP in Arizona and Nevada. In addition to its primary business, the Company has a private mortgage financing business.

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