Vereit (NYSE:VER) and Redwood Trust (NYSE:RWT) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, valuation, earnings and profitability.
Vereit pays an annual dividend of $0.55 per share and has a dividend yield of 7.3%. Redwood Trust pays an annual dividend of $1.20 per share and has a dividend yield of 7.2%. Vereit pays out 78.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Redwood Trust pays out 86.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Vereit is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Vereit and Redwood Trust’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Institutional & Insider Ownership
87.4% of Vereit shares are owned by institutional investors. Comparatively, 81.2% of Redwood Trust shares are owned by institutional investors. 0.1% of Vereit shares are owned by company insiders. Comparatively, 2.8% of Redwood Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Valuation and Earnings
This table compares Vereit and Redwood Trust’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Vereit||$1.25 billion||5.86||$31.81 million||$0.70||10.83|
|Redwood Trust||$338.00 million||4.09||$140.40 million||$1.39||11.99|
Redwood Trust has lower revenue, but higher earnings than Vereit. Vereit is trading at a lower price-to-earnings ratio than Redwood Trust, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Vereit has a beta of 0.51, meaning that its stock price is 49% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500.
This is a summary of current ratings and price targets for Vereit and Redwood Trust, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Vereit presently has a consensus target price of $8.75, suggesting a potential upside of 15.44%. Redwood Trust has a consensus target price of $17.83, suggesting a potential upside of 6.98%. Given Vereit’s higher probable upside, research analysts clearly believe Vereit is more favorable than Redwood Trust.
Redwood Trust beats Vereit on 9 of the 15 factors compared between the two stocks.
Vereit Company Profile
VEREIT is a full-service real estate operating company which owns and manages one of the largest portfolios of single-tenant commercial properties in the U.S. The Company has a total asset book value of $14.3 billion including approximately 4,000 properties and 94.6 million square feet. VEREIT's business model provides equity capital to creditworthy corporations in return for long-term leases on their properties. VEREIT is a publicly traded Maryland corporation listed on the New York Stock Exchange.
Redwood Trust Company Profile
Redwood Trust, Inc., together with its subsidiaries, engages in mortgage banking activities in the United States. The company operates through two segments, Investment Portfolio and Residential Mortgage Banking. The Investment Portfolio segment offers a portfolio of investments in residential mortgage-backed securities retained from Sequoia securitizations, and issued by third parties and other credit risk-related investments; and invests in residential loans held for investment and mortgage servicing rights associated with residential loans. The Residential Mortgage Banking segment operates a mortgage loan conduit, which acquires residential loans from third-party originators for sale, securitization, or transfer to investment portfolio. This segment also includes derivative financial instruments to manage risks associated with residential loans. It qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, the company intends to distribute at least 90% of its taxable income as dividends to shareholders. Redwood Trust, Inc. was founded in 1994 and is headquartered in Mill Valley, California.
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