Capital Trust (NYSE: BXMT) and Redwood Trust (NYSE:RWT) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, earnings, analyst recommendations, risk, profitability and valuation.

Profitability

This table compares Capital Trust and Redwood Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Trust 55.05% 8.76% 2.43%
Redwood Trust 46.04% 12.02% 2.50%

Dividends

Capital Trust pays an annual dividend of $2.48 per share and has a dividend yield of 8.1%. Redwood Trust pays an annual dividend of $1.12 per share and has a dividend yield of 6.8%. Capital Trust pays out 106.4% 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 64.0% of its earnings in the form of a dividend. Redwood Trust has increased its dividend for 3 consecutive years.

Risk and Volatility

Capital Trust has a beta of 0.8, meaning that its stock price is 20% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and target prices for Capital Trust and Redwood Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Trust 0 3 3 0 2.50
Redwood Trust 0 0 0 0 N/A

Capital Trust presently has a consensus price target of $33.50, suggesting a potential upside of 9.12%. Given Capital Trust’s higher possible upside, equities research analysts clearly believe Capital Trust is more favorable than Redwood Trust.

Institutional & Insider Ownership

61.9% of Capital Trust shares are owned by institutional investors. Comparatively, 85.8% of Redwood Trust shares are owned by institutional investors. 0.9% of Capital Trust shares are owned by insiders. Comparatively, 2.3% of Redwood Trust shares are owned by 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.

Earnings & Valuation

This table compares Capital Trust and Redwood Trust’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capital Trust $298.97 million 9.74 $220.95 million $2.33 13.18
Redwood Trust $215.70 million 5.85 $134.95 million $1.75 9.35

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

Summary

Capital Trust beats Redwood Trust on 9 of the 16 factors compared between the two stocks.

About Capital Trust

Blackstone Mortgage Trust, Inc. is a holding company. The Company conducts its operations as a real estate investment trust for the United States federal income tax purposes. The Company originates and purchases senior loans collateralized by properties in North America and Europe. The Company’s business is focused on originating or acquiring senior, floating rate mortgage loans that are secured by a first priority mortgage on commercial real estate assets primarily in the office, lodging, retail, residential and industrial sectors. These investments may be in the form of whole loans or may also include pari passu participations within mortgage loans. It directly originates, co-originates and acquires debt instruments in conjunction with acquisitions, refinancings and recapitalizations of commercial real estate. The Company’s manager is BXMT Advisors L.L.C.

About Redwood Trust

Redwood Trust, Inc., through its subsidiaries, focuses on investing in mortgage and other real estate related assets. The Company is engaged in mortgage banking activities. The Company operates through three segments: Residential Investments, Residential Mortgage Banking and Commercial. The Residential Investments segment includes a portfolio of investments in residential mortgage-backed securities (RMBS) retained from its Sequoia securitizations. The Residential Mortgage Banking segment consists of operating a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. Its Commercial segment consists of investments in multi-family securities and commercial mortgage-backed securities, as well as a remaining commercial loan investment following the sale of the remainder of its commercial mezzanine loan portfolio.

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