Starwood Property Trust (NYSE:STWD) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, profitability, earnings, dividends and valuation.
Dividends
Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 7.7%. Annaly Capital Management pays an annual dividend of $0.88 per share and has a dividend yield of 10.0%. 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. Annaly Capital Management pays out 88.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Starwood Property Trust has raised its dividend for 1 consecutive years and Annaly Capital Management has raised its dividend for 1 consecutive years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a breakdown of recent ratings and price targets for Starwood Property Trust and Annaly Capital Management, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Starwood Property Trust | 0 | 1 | 8 | 0 | 2.89 |
| Annaly Capital Management | 0 | 2 | 10 | 0 | 2.83 |
Starwood Property Trust currently has a consensus target price of $21.1429, indicating a potential downside of 15.39%. Annaly Capital Management has a consensus target price of $8.1042, indicating a potential downside of 7.49%. Given Annaly Capital Management's higher possible upside, analysts clearly believe Annaly Capital Management is more favorable than Starwood Property Trust.
Profitability
This table compares Starwood Property Trust and Annaly Capital Management's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Starwood Property Trust | 35.03% | 11.08% | 0.69% |
| Annaly Capital Management | -20.12% | 13.27% | 1.57% |
Valuation & Earnings
This table compares Starwood Property Trust and Annaly Capital Management's gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Starwood Property Trust | $1.20 billion | 5.97 | $509.66 million | $1.71 | 14.61 |
| Annaly Capital Management | $3.79 billion | 3.23 | $-2,162,860,000.00 | $1.00 | 8.76 |
Starwood Property Trust has higher earnings, but lower revenue than Annaly Capital Management. Annaly Capital Management 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 stock price is 63% more volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 1.15, meaning that its stock price is 15% more volatile than the S&P 500.
Insider and Institutional Ownership
51.6% of Starwood Property Trust shares are held by institutional investors. Comparatively, 44.6% of Annaly Capital Management shares are held by institutional investors. 3.5% of Starwood Property Trust shares are held by company insiders. Comparatively, 0.4% of Annaly Capital Management shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Summary
Starwood Property Trust beats Annaly Capital Management on 9 of the 16 factors compared between the two stocks.
