Critical Analysis: Inland Real Estate (IRC) versus RAIT Financial Trust (RAS)

Inland Real Estate (NYSE: IRC) and RAIT Financial Trust (NYSE:RAS) are both small-cap financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Dividends

Inland Real Estate pays an annual dividend of $0.57 per share and has a dividend yield of 5.4%. RAIT Financial Trust pays an annual dividend of $0.20 per share and has a dividend yield of 48.8%. Inland Real Estate pays out 570.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RAIT Financial Trust pays out -8.5% of its earnings in the form of a dividend. RAIT Financial Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Inland Real Estate and RAIT Financial Trust’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Inland Real Estate N/A N/A N/A $0.10 106.10
RAIT Financial Trust $173.61 million 0.22 $25.34 million ($2.34) -0.18

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

Profitability

This table compares Inland Real Estate and RAIT Financial Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Inland Real Estate -0.49% -2.46% -0.06%
RAIT Financial Trust -137.66% -0.66% -0.09%

Analyst Recommendations

This is a breakdown of current ratings for Inland Real Estate and RAIT Financial Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Inland Real Estate 0 0 0 0 N/A
RAIT Financial Trust 1 3 0 0 1.75

RAIT Financial Trust has a consensus target price of $1.43, indicating a potential upside of 247.56%. Given RAIT Financial Trust’s higher probable upside, analysts clearly believe RAIT Financial Trust is more favorable than Inland Real Estate.

Insider and Institutional Ownership

51.8% of RAIT Financial Trust shares are owned by institutional investors. 1.3% of RAIT Financial Trust shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

RAIT Financial Trust beats Inland Real Estate on 7 of the 11 factors compared between the two stocks.

Inland Real Estate Company Profile

IRC Retail Centers, Inc., formerly Inland Real Estate Corporation, is a real estate investment trust (REIT). The Company owns, operates and develops open-air neighborhood, community and power shopping centers and single tenant retail properties located throughout the Central and Southeastern United States. Through its subsidiaries, Inland Commercial Property Management, Inc. (ICPM) and Inland TRS Property Management, Inc., the Company manages all properties it owns interests in and properties for certain third parties and related parties. The Company owns investment properties located in the States of Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Minnesota, Missouri, Nebraska, New York, North Carolina, Ohio, Oklahoma, South Carolina, Texas, Virginia and Wisconsin. The Company owns interests in approximately 130 investment properties, including those owned through its unconsolidated joint ventures.

RAIT Financial Trust Company Profile

RAIT Financial Trust (RAIT) is a real estate investment trust (REIT). The Company focuses on providing commercial real estate (CRE) financing throughout the United States. The core of its business is a full service CRE lending platform focused on first lien loans. It offers customized lending solutions to meet borrower needs and internal credit goals. It offers personalized middle-market financing solutions and a complement of lending products for CRE. The Company may also offer mezzanine loans and preferred equity interests in limited circumstances to support first lien loans. It is engaged in floating rate securitization programs and has access to multiple sources of funding, including senior debt, convertible securities, preferred securities and common securities. The Company also owns and manages a portfolio of CRE properties, and manages real estate assets for third parties. The Company is engaged in lending, owning and managing CRE assets throughout the United States.

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