Government Properties Income Trust (NYSE: GOV) and Seritage Growth Properties (NYSE:SRG) are both small-cap financials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, profitability, earnings, analyst recommendations and risk.

Earnings and Valuation

This table compares Government Properties Income Trust and Seritage Growth Properties’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Government Properties Income Trust $269.69 million 6.46 $143.68 million ($2.26) -8.02
Seritage Growth Properties $248.20 million 5.81 $163.67 million ($2.37) -17.92

Seritage Growth Properties has higher revenue, but lower earnings than Government Properties Income Trust. Seritage Growth Properties is trading at a lower price-to-earnings ratio than Government Properties Income Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations for Government Properties Income Trust and Seritage Growth Properties, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Government Properties Income Trust 3 1 1 0 1.60
Seritage Growth Properties 1 1 1 0 2.00

Government Properties Income Trust presently has a consensus target price of $18.40, indicating a potential upside of 1.55%. Seritage Growth Properties has a consensus target price of $43.00, indicating a potential upside of 1.25%. Given Government Properties Income Trust’s higher probable upside, analysts plainly believe Government Properties Income Trust is more favorable than Seritage Growth Properties.

Risk and Volatility

Government Properties Income Trust has a beta of 1.04, meaning that its stock price is 4% more volatile than the S&P 500. Comparatively, Seritage Growth Properties has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500.

Profitability

This table compares Government Properties Income Trust and Seritage Growth Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Government Properties Income Trust 4.64% 5.16% 0.55%
Seritage Growth Properties -31.23% -5.52% -2.83%

Institutional and Insider Ownership

74.9% of Seritage Growth Properties shares are held by institutional investors. 9.8% of Seritage Growth Properties shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Government Properties Income Trust pays an annual dividend of $1.72 per share and has a dividend yield of 9.5%. Seritage Growth Properties pays an annual dividend of $1.00 per share and has a dividend yield of 2.4%. Government Properties Income Trust pays out -76.1% of its earnings in the form of a dividend. Seritage Growth Properties pays out -42.2% 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. Government Properties Income Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Government Properties Income Trust beats Seritage Growth Properties on 10 of the 15 factors compared between the two stocks.

About Government Properties Income Trust

Government Properties Income Trust is a real estate investment trust (REIT). The Company operates through two segments: ownership of properties that are primarily leased to government tenants and its equity method investment in Select Income REIT (SIR). The Company’s properties are located in areas, including Alabama, Arizona, California, Colorado, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey and New Mexico. As of December 31, 2016, the Company owned 73 properties (95 buildings). As of December 31, 2016, the Company’s properties were located in 31 states and the District of Columbia, and contained approximately 11.4 million rentable square feet.

About Seritage Growth Properties

Seritage Growth Properties (Seritage) is a self-administered and self-managed real estate investment trust. The Company is engaged in the acquisition, ownership, development, redevelopment, management and leasing of diversified retail real estate throughout the United States. Its assets are held by and its operations are primarily conducted through, directly or indirectly, Seritage Growth Properties, L.P. (Operating Partnership). As of December 31, 2016, the Company’s portfolio included approximately 42.2 million square feet of gross leasable area (GLA), consisting of 235 owned properties totaling over 36.8 million square feet of GLA across 49 states and Puerto Rico, and interests in 31 joint venture properties totaling over 5.4 million square feet of GLA across 17 states. As of December 31, 2016, it included over 3,000 acres of land or approximately 13 acres per site for its owned properties. Its properties are primarily located in areas, including in California, Florida and Texas.

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