Starwood Property Trust (NYSE: STWD) and Capstead Mortgage (NYSE:CMO) are both financials companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, risk, dividends and institutional ownership.
This table compares Starwood Property Trust and Capstead Mortgage’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Starwood Property Trust||52.28%||11.88%||0.79%|
This is a breakdown of recent ratings and recommmendations for Starwood Property Trust and Capstead Mortgage, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Starwood Property Trust||0||0||2||0||3.00|
Starwood Property Trust currently has a consensus target price of $24.00, indicating a potential upside of 15.38%. Capstead Mortgage has a consensus target price of $11.00, indicating a potential upside of 27.02%. Given Capstead Mortgage’s higher probable upside, analysts clearly believe Capstead Mortgage is more favorable than Starwood Property Trust.
Volatility & Risk
Starwood Property Trust has a beta of 0.37, meaning that its share price is 63% less volatile than the S&P 500. Comparatively, Capstead Mortgage has a beta of 0.3, meaning that its share price is 70% less volatile than the S&P 500.
Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 9.2%. Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.8%. Starwood Property Trust pays out 115.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capstead Mortgage pays out 126.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Starwood Property Trust has increased its dividend for 3 consecutive years. Starwood Property Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Institutional & Insider Ownership
67.4% of Starwood Property Trust shares are held by institutional investors. Comparatively, 73.0% of Capstead Mortgage shares are held by institutional investors. 2.4% of Starwood Property Trust shares are held by company insiders. Comparatively, 1.7% of Capstead Mortgage shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Earnings and Valuation
This table compares Starwood Property Trust and Capstead Mortgage’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Starwood Property Trust||$784.67 million||6.92||$365.18 million||$1.66||12.53|
|Capstead Mortgage||$213.33 million||3.90||$82.87 million||$0.60||14.43|
Starwood Property Trust has higher revenue and earnings than Capstead Mortgage. Starwood Property Trust is trading at a lower price-to-earnings ratio than Capstead Mortgage, indicating that it is currently the more affordable of the two stocks.
Starwood Property Trust beats Capstead Mortgage on 14 of the 17 factors compared between the two stocks.
About Starwood Property Trust
Starwood Property Trust, Inc. is a real estate investment trust. The Company operates through three business segments: Real estate lending (the Lending Segment), which engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities, and other real estate and real estate-related debt investments; Real estate investing and servicing (the Investing and Servicing Segment), which includes a servicing business in the United States that manages and works out problem assets; an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, and a mortgage loan business, and Real estate property (the Property Segment), which engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties.
About Capstead Mortgage
Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.
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