Head-To-Head Review: Lexington Realty Trust (LXP) versus PS Business Parks (PSB)

Lexington Realty Trust (NYSE: LXP) and PS Business Parks (NYSE:PSB) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, risk, dividends, profitability, earnings, valuation and institutional ownership.

Dividends

Lexington Realty Trust pays an annual dividend of $0.70 per share and has a dividend yield of 7.0%. PS Business Parks pays an annual dividend of $3.40 per share and has a dividend yield of 2.6%. Lexington Realty Trust pays out 259.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PS Business Parks pays out 113.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Lexington Realty Trust has raised its dividend for 3 consecutive years and PS Business Parks has raised its dividend for 6 consecutive years.

Volatility and Risk

Lexington Realty Trust has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500. Comparatively, PS Business Parks has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500.

Profitability

This table compares Lexington Realty Trust and PS Business Parks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lexington Realty Trust 17.96% 5.29% 2.00%
PS Business Parks 39.78% 16.95% 7.69%

Valuation & Earnings

This table compares Lexington Realty Trust and PS Business Parks’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lexington Realty Trust $429.50 million 5.62 $95.62 million $0.27 37.15
PS Business Parks $387.39 million 9.04 $128.02 million $3.01 42.67

PS Business Parks has lower revenue, but higher earnings than Lexington Realty Trust. Lexington Realty Trust is trading at a lower price-to-earnings ratio than PS Business Parks, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings for Lexington Realty Trust and PS Business Parks, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lexington Realty Trust 1 6 0 0 1.86
PS Business Parks 1 1 0 0 1.50

Lexington Realty Trust currently has a consensus target price of $10.55, suggesting a potential upside of 5.18%. PS Business Parks has a consensus target price of $107.00, suggesting a potential downside of 16.70%. Given Lexington Realty Trust’s stronger consensus rating and higher probable upside, analysts plainly believe Lexington Realty Trust is more favorable than PS Business Parks.

Insider and Institutional Ownership

74.0% of Lexington Realty Trust shares are held by institutional investors. Comparatively, 72.0% of PS Business Parks shares are held by institutional investors. 3.1% of Lexington Realty Trust shares are held by company insiders. Comparatively, 1.6% of PS Business Parks shares are held by company 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.

Summary

PS Business Parks beats Lexington Realty Trust on 9 of the 16 factors compared between the two stocks.

Lexington Realty Trust Company Profile

Lexington Realty Trust is a real estate investment trust (REIT). The Company owns a portfolio of equity and debt investments in single-tenant commercial properties. As of December 31, 2016, the Company had equity ownership interests in approximately 195 consolidated real estate properties, located in 40 states and containing an aggregate of approximately 43.3 million square feet of space, approximately 96.0% of which was leased. The Company conducts its operations either directly or indirectly through property owner subsidiaries and lender subsidiaries, which are single purpose entities; an operating partnership, Lepercq Corporate Income Fund L.P. (LCIF), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests; Lexington Realty Advisors, Inc. (LRA), a subsidiary of the Company, and investments in joint ventures.

PS Business Parks Company Profile

PS Business Parks, Inc. is a self-advised and self-managed real estate investment trust (REIT). The Company owns, operates and develops commercial properties, primarily multi-tenant flex, office and industrial parks. It focuses on owning concentrated business parks. PS Business Parks, L.P. (the Operating Partnership) is a California limited partnership, which owns directly or indirectly substantially all of its assets and through, which the Company conducts substantially all of its business. PSB is the partner of the Operating Partnership and, as of December 31, 2016, owned 77.9% of the common partnership units. The remaining common partnership units are owned by Public Storage (PS). As of December 31, 2016, the Company owned and operated 28.1 million rentable square feet of commercial space, comprising 99 business parks, in the states, including California, Texas, Virginia, Florida, Maryland and Washington. It also manages 684,000 rentable square feet on behalf of PS.

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