Starwood Property Trust (NYSE:STWD) and AGNC Investment (NASDAQ:AGNC) are both mid-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, profitability, risk, analyst recommendations and dividends.
Dividends
Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 8.4%. AGNC Investment pays an annual dividend of $1.44 per share and has a dividend yield of 9.0%. Starwood Property Trust pays out 112.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AGNC Investment pays out 66.7% of its earnings in the form of a dividend. Starwood Property Trust has increased its dividend for 1 consecutive years and AGNC Investment has increased its dividend for 1 consecutive years. AGNC Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings and Valuation
This table compares Starwood Property Trust and AGNC Investment's revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
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Starwood Property Trust | $1.20 billion | 5.43 | $509.66 million | $1.71 | 13.35 |
AGNC Investment | $693 million | 12.61 | $688 million | $2.16 | 7.42 |
AGNC Investment has lower revenue, but higher earnings than Starwood Property Trust. AGNC Investment is trading at a lower price-to-earnings ratio than Starwood Property Trust, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Starwood Property Trust has a beta of 1.63, meaning that its share price is 63% more volatile than the S&P 500. Comparatively, AGNC Investment has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500.
Analyst Recommendations
This is a summary of current ratings for Starwood Property Trust and AGNC Investment, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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Starwood Property Trust | 0 | 1 | 8 | 0 | 2.89 |
AGNC Investment | 0 | 5 | 12 | 0 | 2.71 |
Starwood Property Trust currently has a consensus target price of $19.7143, suggesting a potential downside of 13.65%. AGNC Investment has a consensus target price of $15.4559, suggesting a potential downside of 3.58%. Given AGNC Investment's higher possible upside, analysts plainly believe AGNC Investment is more favorable than Starwood Property Trust.
Profitability
This table compares Starwood Property Trust and AGNC Investment's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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Starwood Property Trust | 35.03% | 11.08% | 0.69% |
AGNC Investment | -17.91% | 16.29% | 1.62% |
Insider and Institutional Ownership
51.6% of Starwood Property Trust shares are held by institutional investors. Comparatively, 55.4% of AGNC Investment shares are held by institutional investors. 3.5% of Starwood Property Trust shares are held by insiders. Comparatively, 0.3% of AGNC Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Summary
AGNC Investment beats Starwood Property Trust on 10 of the 16 factors compared between the two stocks.