Head to Head Review: Ares Commercial Real Estate (NYSE:ACRE) and Welltower (NYSE:WELL)

Welltower (NYSE:WELL) and Ares Commercial Real Estate (NYSE:ACRE) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.

Dividends

Welltower pays an annual dividend of $3.48 per share and has a dividend yield of 4.0%. Ares Commercial Real Estate pays an annual dividend of $1.32 per share and has a dividend yield of 8.4%. Welltower pays out 86.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate pays out 95.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate has increased its dividend for 3 consecutive years. Ares Commercial Real Estate is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Welltower and Ares Commercial Real Estate’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Welltower $4.70 billion 7.56 $804.95 million $4.03 21.76
Ares Commercial Real Estate $118.28 million 3.82 $38.60 million $1.39 11.27

Welltower has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than Welltower, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and target prices for Welltower and Ares Commercial Real Estate, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Welltower 0 7 7 0 2.50
Ares Commercial Real Estate 0 1 1 1 3.00

Welltower currently has a consensus price target of $80.83, indicating a potential downside of 7.82%. Ares Commercial Real Estate has a consensus price target of $14.75, indicating a potential downside of 5.81%. Given Ares Commercial Real Estate’s stronger consensus rating and higher possible upside, analysts clearly believe Ares Commercial Real Estate is more favorable than Welltower.

Insider & Institutional Ownership

89.3% of Welltower shares are held by institutional investors. Comparatively, 63.1% of Ares Commercial Real Estate shares are held by institutional investors. 0.2% of Welltower shares are held by company insiders. Comparatively, 2.2% of Ares Commercial Real Estate shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Welltower and Ares Commercial Real Estate’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Welltower 11.98% 4.62% 2.28%
Ares Commercial Real Estate 32.10% 9.29% 2.38%

Volatility and Risk

Welltower has a beta of 0.24, indicating that its stock price is 76% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500.

Summary

Ares Commercial Real Estate beats Welltower on 10 of the 18 factors compared between the two stocks.

Welltower Company Profile

Welltower Inc. (NYSE:WELL), an S&P 500 company headquartered in Toledo, Ohio, is driving the transformation of health care infrastructure. The Company invests with leading seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people's wellness and overall health care experience. Welltower™, a real estate investment trust ("REIT"), owns interests in properties concentrated in major, high-growth markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties.

Ares Commercial Real Estate Company Profile

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of commercial real estate (CRE) properties. The company originates senior mortgage loans, subordinate debt products, real estate preferred equity investments, mezzanine loans, and other CRE investments. Ares Commercial Real Estate Corporation has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Management LLC operates as the manager of the company. The company was founded in 2011 and is headquartered in New York, New York.

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