DuPont Fabros Technology (DFT) & Resource Capital (RSO) Critical Review

DuPont Fabros Technology (NYSE: DFT) and Resource Capital (NYSE:RSO) are both financials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, profitability, analyst recommendations, earnings and risk.

Earnings & Valuation

This table compares DuPont Fabros Technology and Resource Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DuPont Fabros Technology N/A N/A N/A $1.65 40.19
Resource Capital $62.68 million 4.33 -$30.36 million $0.27 32.00

DuPont Fabros Technology has higher earnings, but lower revenue than Resource Capital. Resource Capital is trading at a lower price-to-earnings ratio than DuPont Fabros Technology, indicating that it is currently the more affordable of the two stocks.

Dividends

DuPont Fabros Technology pays an annual dividend of $2.00 per share and has a dividend yield of 3.0%. Resource Capital pays an annual dividend of $0.20 per share and has a dividend yield of 2.3%. DuPont Fabros Technology pays out 121.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Resource Capital pays out 74.1% of its earnings in the form of a dividend. DuPont Fabros Technology has increased its dividend for 6 consecutive years. DuPont Fabros Technology is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares DuPont Fabros Technology and Resource Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DuPont Fabros Technology 26.98% 17.13% 4.69%
Resource Capital 63.00% -1.23% -0.44%

Risk and Volatility

DuPont Fabros Technology has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500. Comparatively, Resource Capital has a beta of 0.99, meaning that its stock price is 1% less volatile than the S&P 500.

Institutional and Insider Ownership

50.8% of Resource Capital shares are owned by institutional investors. 5.6% of DuPont Fabros Technology shares are owned by company insiders. Comparatively, 4.8% of Resource Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for DuPont Fabros Technology and Resource Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DuPont Fabros Technology 0 8 3 0 2.27
Resource Capital 0 3 0 0 2.00

DuPont Fabros Technology currently has a consensus target price of $62.11, suggesting a potential downside of 6.33%. Resource Capital has a consensus target price of $11.50, suggesting a potential upside of 33.10%. Given Resource Capital’s higher probable upside, analysts plainly believe Resource Capital is more favorable than DuPont Fabros Technology.

Summary

DuPont Fabros Technology beats Resource Capital on 8 of the 14 factors compared between the two stocks.

About DuPont Fabros Technology

DuPont Fabros Technology, Inc. (DFT) is a real estate investment trust (REIT). The Company owns, acquires, develops and operates wholesale data centers. The Company’s customers include national and international enterprises across various industries, such as technology, Internet, content providers, cloud providers, media, communications, healthcare and financial services. Its data centers are located in four population centers: Northern Virginia; suburban Chicago, Illinois; Piscataway, New Jersey, and Santa Clara, California. As of December 31, 2016, the Company owned various properties, including 11 operating data centers facilities; five phases of existing data center facilities under development; one shell of a data center under development; two data center facilities with a phase or phases available for development, and parcels of land held for development of four data centers. As of December 31, 2016, the Company’s 11 data centers had a total of 3.3 million gross square feet.

About Resource Capital

Resource Capital Corp. is a real estate finance company. The Company operates through four segments: Commercial Real Estate Debt Investments, Commercial Finance, Residential Mortgage Lending and Corporate & Other. The Commercial Real Estate Debt Investments segment includes the Company’s activities and operations related to commercial real estate loans, commercial real estate-related securities and investments in real estate. The Commercial Finance segment includes the Company’s activities and operations related to syndicated corporate loans, syndicated corporate loan-related securities and direct financing leases. The Residential Mortgage Lending segment includes the Company’s activities and operations related to the investment in residential mortgage-backed securities (RMBS).

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