Two Harbors Investments Corp (NYSE: TWO) and Sun Communities (NYSE:SUI) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, earnings, profitability, institutional ownership, valuation and risk.

Earnings and Valuation

This table compares Two Harbors Investments Corp and Sun Communities’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Two Harbors Investments Corp $664.12 million 5.32 $499.03 million $1.43 7.08
Sun Communities $936.86 million 7.49 $443.91 million $0.70 126.83

Two Harbors Investments Corp has higher revenue, but lower earnings than Sun Communities. Two Harbors Investments Corp is trading at a lower price-to-earnings ratio than Sun Communities, indicating that it is currently the more affordable of the two stocks.

Dividends

Two Harbors Investments Corp pays an annual dividend of $1.04 per share and has a dividend yield of 10.3%. Sun Communities pays an annual dividend of $2.68 per share and has a dividend yield of 3.0%. Two Harbors Investments Corp pays out 72.7% of its earnings in the form of a dividend. Sun Communities pays out 382.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Two Harbors Investments Corp and Sun Communities, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Two Harbors Investments Corp 0 2 3 0 2.60
Sun Communities 0 2 3 0 2.60

Two Harbors Investments Corp presently has a consensus target price of $9.69, suggesting a potential downside of 4.27%. Sun Communities has a consensus target price of $87.80, suggesting a potential downside of 1.10%. Given Sun Communities’ higher probable upside, analysts clearly believe Sun Communities is more favorable than Two Harbors Investments Corp.

Risk & Volatility

Two Harbors Investments Corp has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500. Comparatively, Sun Communities has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500.

Profitability

This table compares Two Harbors Investments Corp and Sun Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Two Harbors Investments Corp 72.15% 10.26% 1.60%
Sun Communities 6.82% 2.59% 1.07%

Insider and Institutional Ownership

72.3% of Two Harbors Investments Corp shares are held by institutional investors. Comparatively, 89.2% of Sun Communities shares are held by institutional investors. 1.2% of Two Harbors Investments Corp shares are held by insiders. Comparatively, 4.2% of Sun Communities 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

Two Harbors Investments Corp beats Sun Communities on 8 of the 14 factors compared between the two stocks.

About Two Harbors Investments Corp

Two Harbors Investment Corp. is a real estate investment trust. The Company is focused on investing in, financing and managing residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR), commercial real estate and other financial assets (collectively known as target assets). Its investment objective is to provide attractive risk-adjusted total return to its stockholders over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk. The Company finances its RMBS and commercial real estate assets through short- and long-term borrowings structured as repurchase agreements and advances from the Federal Home Loan Bank of Des Moines, or the FHLB. It also finances its MSR through revolving credit facilities.

About Sun Communities

Sun Communities, Inc. is a self-administered and self-managed real estate investment trust (REIT). The Company is a fully integrated real estate company, which, together with its affiliates and predecessors, has been in the business of acquiring, operating, developing, and expanding manufactured housing (MH) and recreational vehicle (RV). As of December 31, 2016, it owned and operated or had an interest in a portfolio of properties located throughout the United States and Ontario, Canada, including 226 MH communities, 87 RV communities, and 28 properties containing both MH and RV sites. The Company operates through two segments: Real Property Operations and Home Sales and Rentals. The Real Property Operations segment owns, operates, or has an interest in a portfolio, and develops MH communities and RV communities throughout the United States and is in the business of acquiring, operating, and expanding MH and RV communities.

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