Head-To-Head Review: Whitestone REIT (NYSE:WSR) vs. Two Harbors Investment (NYSE:TWO)

Two Harbors Investment (NYSE:TWO) and Whitestone REIT (NYSE:WSR) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their valuation, risk, dividends, analyst recommendations, profitability, institutional ownership and earnings.

Profitability

This table compares Two Harbors Investment and Whitestone REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investment	27.71%	3.64%	0.43%
Whitestone REIT	10.68%	3.75%	1.42%

Valuation and Earnings

This table compares Two Harbors Investment and Whitestone REIT”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investment	$322.40 million	4.55	-$106.37 million	$1.78	7.97
Whitestone REIT	$150.55 million	4.43	$19.18 million	$0.48	27.83

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

Analyst Ratings

This is a breakdown of recent ratings and price targets for Two Harbors Investment and Whitestone REIT, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investment	0	3	3	0	2.50
Whitestone REIT	0	1	3	0	2.75

Two Harbors Investment presently has a consensus price target of $14.90, suggesting a potential upside of 5.04%. Whitestone REIT has a consensus price target of $15.00, suggesting a potential upside of 12.28%. Given Whitestone REIT’s stronger consensus rating and higher possible upside, analysts clearly believe Whitestone REIT is more favorable than Two Harbors Investment.

Institutional & Insider Ownership

64.2% of Two Harbors Investment shares are owned by institutional investors. Comparatively, 69.5% of Whitestone REIT shares are owned by institutional investors. 0.6% of Two Harbors Investment shares are owned by insiders. Comparatively, 5.5% of Whitestone REIT 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 $1.80 per share and has a dividend yield of 12.7%. Whitestone REIT pays an annual dividend of $0.49 per share and has a dividend yield of 3.7%. Two Harbors Investment pays out 101.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Whitestone REIT pays out 102.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Two Harbors Investment has a beta of 1.86, meaning that its stock price is 86% more volatile than the S&P 500. Comparatively, Whitestone REIT has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500.

Summary

Whitestone REIT beats Two Harbors Investment on 8 of the 15 factors compared between the two stocks.

About Two Harbors Investment

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About Whitestone REIT

Whitestone REIT (NYSE: WSR) is a community-centered real estate investment trust (REIT) that acquires, owns, operates, and develops open-air, retail centers located in some of the fastest growing markets in the country: Phoenix, Austin, Dallas-Fort Worth, Houston and San Antonio. Our centers are convenience focused: merchandised with a mix of service-oriented tenants providing food (restaurants and grocers), self-care (health and fitness), services (financial and logistics), education and entertainment to the surrounding communities. The Company believes its strong community connections and deep tenant relationships are key to the success of its current centers and its acquisition strategy.