American Assets Trust (AAT) & Lexington Realty Trust (NYSE:LXP) Critical Review

Lexington Realty Trust (NYSE: LXP) and American Assets Trust (NYSE:AAT) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, earnings, valuation, profitability, dividends, risk and analyst recommendations.

Dividends

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Lexington Realty Trust pays an annual dividend of $0.71 per share and has a dividend yield of 8.9%. American Assets Trust pays an annual dividend of $1.08 per share and has a dividend yield of 3.1%. Lexington Realty Trust pays out 73.2% of its earnings in the form of a dividend. American Assets Trust pays out 56.3% 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. Lexington Realty Trust has increased its dividend for 7 consecutive years. Lexington Realty Trust 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 recommendations and price targets for Lexington Realty Trust and American Assets Trust, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lexington Realty Trust 1 7 0 0 1.88
American Assets Trust 1 0 3 0 2.50

Lexington Realty Trust presently has a consensus price target of $10.13, indicating a potential upside of 27.52%. American Assets Trust has a consensus price target of $42.00, indicating a potential upside of 21.99%. Given Lexington Realty Trust’s higher possible upside, analysts clearly believe Lexington Realty Trust is more favorable than American Assets Trust.

Volatility & Risk

Lexington Realty Trust has a beta of 0.88, suggesting that its share price is 12% less volatile than the S&P 500. Comparatively, American Assets Trust has a beta of 0.41, suggesting that its share price is 59% less volatile than the S&P 500.

Profitability

This table compares Lexington Realty Trust and American Assets Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lexington Realty Trust 21.84% 6.64% 2.45%
American Assets Trust 10.16% 3.76% 1.45%

Valuation & Earnings

This table compares Lexington Realty Trust and American Assets Trust’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lexington Realty Trust $391.64 million 4.88 $85.58 million $0.97 8.19
American Assets Trust $314.98 million 5.16 $40.13 million $1.92 17.93

Lexington Realty Trust has higher revenue and earnings than American Assets Trust. Lexington Realty Trust is trading at a lower price-to-earnings ratio than American Assets Trust, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

75.0% of Lexington Realty Trust shares are held by institutional investors. Comparatively, 99.1% of American Assets Trust shares are held by institutional investors. 3.1% of Lexington Realty Trust shares are held by insiders. Comparatively, 34.2% of American Assets Trust shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Lexington Realty Trust beats American Assets Trust on 9 of the 17 factors compared between the two stocks.

Lexington Realty Trust Company Profile

Lexington Realty Trust is a real estate investment trust (REIT). The Company owns a portfolio of equity and debt investments in single-tenant commercial properties. As of December 31, 2016, the Company had equity ownership interests in approximately 195 consolidated real estate properties, located in 40 states and containing an aggregate of approximately 43.3 million square feet of space, approximately 96.0% of which was leased. The Company conducts its operations either directly or indirectly through property owner subsidiaries and lender subsidiaries, which are single purpose entities; an operating partnership, Lepercq Corporate Income Fund L.P. (LCIF), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests; Lexington Realty Advisors, Inc. (LRA), a subsidiary of the Company, and investments in joint ventures.

American Assets Trust Company Profile

American Assets Trust, Inc. (the ?company?) is a full service, vertically integrated and self-administered real estate investment trust, or REIT, headquartered in San Diego, California. The company has over 50 years of experience in acquiring, improving, developing and managing premier retail, office and residential properties throughout the United States in some of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington, Texas and Hawaii. The company's retail portfolio comprises approximately 3.2 million rentable square feet, and its office portfolio comprises approximately 2.7 million square feet. In addition, the company owns one mixed-use property (including approximately 97,000 rentable square feet of retail space and a 369-room all-suite hotel) and 2,112 multifamily units. In 2011, the company was formed to succeed to the real estate business of American Assets, Inc., a privately held corporation founded in 1967 and, as such, has significant experience, long-standing relationships and extensive knowledge of its core markets, submarkets and asset classes. For additional information, please visit www.americanassetstrust.com.

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