Two Harbors Investment (NYSE: TWO) and Mid-America Apartment Communities (NYSE:MAA) are both mid-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, earnings, valuation, profitability, analyst recommendations and dividends.

Insider and Institutional Ownership

93.0% of Mid-America Apartment Communities shares are owned by institutional investors. 1.2% of Two Harbors Investment shares are owned by insiders. Comparatively, 1.3% of Mid-America Apartment Communities shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Two Harbors Investment pays an annual dividend of $2.11 per share and has a dividend yield of 12.9%. Mid-America Apartment Communities pays an annual dividend of $3.48 per share and has a dividend yield of 3.4%. Two Harbors Investment pays out 72.3% of its earnings in the form of a dividend. Mid-America Apartment Communities pays out 156.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Mid-America Apartment Communities has increased its dividend for 6 consecutive years. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Two Harbors Investment and Mid-America Apartment Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Two Harbors Investment 63.23% 10.27% 1.52%
Mid-America Apartment Communities 16.73% 4.22% 2.40%

Earnings & Valuation

This table compares Two Harbors Investment and Mid-America Apartment Communities’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Two Harbors Investment $633.49 million 4.51 $353.27 million $2.92 5.61
Mid-America Apartment Communities $1.13 billion 10.41 $212.22 million $2.22 46.45

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

Analyst Ratings

This is a summary of recent ratings and target prices for Two Harbors Investment and Mid-America Apartment Communities, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Two Harbors Investment 0 2 4 0 2.67
Mid-America Apartment Communities 0 5 7 0 2.58

Two Harbors Investment presently has a consensus price target of $17.92, indicating a potential upside of 9.31%. Mid-America Apartment Communities has a consensus price target of $110.80, indicating a potential upside of 7.44%. Given Two Harbors Investment’s stronger consensus rating and higher possible upside, analysts plainly believe Two Harbors Investment is more favorable than Mid-America Apartment Communities.

Volatility and Risk

Two Harbors Investment has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500. Comparatively, Mid-America Apartment Communities has a beta of 0.34, suggesting that its stock price is 66% less volatile than the S&P 500.

Summary

Two Harbors Investment beats Mid-America Apartment Communities on 9 of the 17 factors compared between the two stocks.

About Two Harbors Investment

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 Mid-America Apartment Communities

Mid-America Apartment Communities, Inc. is a multifamily focused, self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, acquires and develops apartment communities primarily located in the Southeast and Southwest regions of the United States. It operates through three segments: Large market same store, Secondary market same store and Non-Same Store and Other. Its Large market same store communities are communities in markets with a population of at least one million and at least 1% of the total public multifamily REIT units that it has owned. Its Secondary market same store communities are communities in markets with populations of more than one million but less than 1% of the total public multifamily REIT units or markets with populations of less than one million that it has owned. Its Non-same store communities and other includes recent acquisitions and communities in development or lease-up communities.

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