Outlook for ACRE Stock Remains Bullish
It’s tough not to love an ultra-high-yielding dividend stock reporting strong results with robust industry tailwinds. There’s a risk/reward trade-off with dividends. It’s easy to find high-yielding stocks, but it’s more difficult to find those that are compelling. Ares Commercial Real Estate Corp (NYSE:ACRE) is a great mortgage real estate investment trust (mREIT) that income investors should put on their radar.
First, as an mREIT, Ares Commercial should benefit from lower interest rates. Higher interest rates are bad for REITs, because they borrow a lot of money to build their portfolios and higher interest rates make it more expensive to borrow, which cuts into earnings and profitability.
The Federal Reserve recently lowered its key overnight lending rate, which directly impacts interest rates, for a second consecutive time. The central bank cut its interest rate by 25 basis points, or 0.25%, to a target range of 3.75% to 4.0%.
The Fed meets one more time this year, in December. The median forecast is for another rate cut to 3.5% to 3.75%, with the possibility of four more interest-rate cuts in 2026. (Source: “Federal Reserve issues FOMC statement,” The Board Of Governors of the Federal Reserve System, October 29, 2025.)
If you’re looking to borrow money to buy a home, the 30-year fixed rate is still hovering above six percent while 15-year mortgages are near 5.5%. (Source: “30-Year Fixed Rate Mortgage Average in the United States,” Federal Reserve Bank of St. Louis, November 6, 2025.)
Then there’s the U.S. housing market. The average U.S. home value continues to rise, hovering near $363,400. Over the last seven years, the average value of U.S. homes has risen 63%. (Source: “United States Housing Market,” Zillow, last accessed November 7, 2025.)
These tailwinds should help energize ACRE stock and its dividends over the coming quarters.
About Ares Commercial Real Estate Corp
Ares is a specialty finance company that originates and invests in commercial real estate (CRE) loan and related investments here in the U.S. (Source: “Third Quarter 2025 Earnings Presentation,” Ares Commercial Real Estate Corp, last accessed November 7, 2025.)
The company originates senior mortgage loans (99% of portfolio), subordinate debt and preferred equity products, mezzanine loans, and other CRE investments, including commercial mortgage-backed securities.
As of September 30, 2025, Ares Commercial Real Estate Corp had total originated commitments of $1.4 billion across 27 loans.
By property type, office is the biggest component at 38%; this is followed by multifamily (28%), hotels (9%), industrial (13%), self storage (6%), and residential/condominium (12%).
Ares Commercial Real Estate is also diversified geographically, with 46% of its portfolio located in the Mid-Atlantic/Northeast, followed by the Midwest (22%), West (15%), Southeast (10%), and Southwest (7%).
Company Reports a Strong Q3
For the third quarter ended September 30, 2025, Ares Commercial Real Estate reported third-quarter net income of $4.7 million, or $0.08 per share, a big improvement over the third-quarter 2024 net loss of $5.9 million, or a loss of $0.11 per share. (Source: “Ares Commercial Real Estate Corporation Reports Third Quarter 2025 Results,” Ares Commercial Real Estate Corp, November 7, 2025.)
Ares’ distributable earnings, which a company looks at for its dividends, came in at $5.5 million, or $0.10 per share. It ended the quarter with cash and cash equivalents of $84.8 million.
Commenting on the third-quarter results, Bryan Donohoe, the company’s chief executive officer, said, “In the third quarter, we delivered increased sequential earnings and stable CECL reserve and book values, while continuing to strengthen our financial flexibility by addressing risk rated 4 and 5 loans and reducing office loans.
“Our progress is driving ACRE’s ability to accelerate its investing activity, evidenced by more than $360 million of new loan commitments since the beginning of the third quarter. We believe this investment activity, alongside the resolution of non-earning assets, are important steps in repositioning the portfolio,” Donohoe concluded.
Jeff Gonzales, Ares’ chief financial officer, added, “Year to date we have collected nearly $500 million of repayments further bolstering our liquidity position. As of September 30, 2025, we had approximately $173 million of available capital. We anticipate additional repayments will generate greater liquidity and support increased investment activity.”
Q4 Dividend of $0.15/Share Declared
As an mREIT, Ares Commercial Real Estate Corp has to legally distribute at least 90% of its taxable income to shareholders in the form of dividends. This is why REITs are home to some of the biggest, most reliable dividends on Wall Street.
At the same time, because dividends are tied to distributable earnings, which are impacted by mortgage rates, loans, etc., those payouts can fluctuate.
For the fourth quarter, Ares Commercial Real Estate declared a dividend of $0.15 per share, or $0.60 on an annual basis, for a forward yield of 13.7%.
ACRE Stock Up 17.5% Over the Last 3 Months
For the most part, Ares has a big forward dividend yield, because its stock hasn’t really done much over the last year. As of November 7, ACRE stock is down five percent year to date and 18% on an annual basis.
Thanks to positive industry dynamics and monetary policies, the outlook for ACRE is a lot more bullish, with the stock up:
- 17.5% over the last three months
- 15% over the last six months
Chart courtesy of StockCharts.com
The Lowdown on Ares Commercial Real Estate Corp
Ares Commercial Real Estate Corp is an mREIT with a diversified portfolio across asset classes and geography. During the third quarter, the company reported net income of $5.0 million, or $0.08 per diluted common per share, and distributable earnings of $6.0 million or $0.10 per diluted common share.
The mREIT maintained a strong balance sheet position to support portfolio repositioning. This included collecting $162.0 million in repayments, and ending the quarter with $173.0 million in available capital, including $88.0 million in cash.
Ares also accelerated investment activity. It closed five senior loans totaling $93.0 million in loan commitments collateralized by multifamily and self-storage properties. Subsequent to the end of the quarter, the mREIT closed five senior loans totaling $271.0 million in loan commitments collateralized by industrial, multifamily, hotel, and self-storage properties.
On the passive income front, it declared a fourth-quarter cash dividend of $0.15 per common share, which equates to an annualized implied dividend yield of almost 14%.
All of this is great news for income hogs and the 181 institutional holders accounting for 46.4% of outstanding shares. The top three are BlackRock Inc., The Vanguard Group Inc, and Geode Capital Management LLC. (Source: “Ares Commercial Real Estate Corporation (ACRE),” Yahoo! Finance, last accessed November 7, 2025.)