Two Harbors Investment (NYSE:TWO) and Whitestone REIT (NYSE:WSR) Financial Survey

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

Dividends

Whitestone REIT pays an annual dividend of $0.49 per share and has a dividend yield of 3.7%. Two Harbors Investment pays an annual dividend of $1.80 per share and has a dividend yield of 12.7%. 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 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. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

69.5% of Whitestone REIT shares are owned by institutional investors. Comparatively, 64.2% of Two Harbors Investment shares are owned by institutional investors. 5.5% of Whitestone REIT shares are owned by insiders. Comparatively, 0.6% of Two Harbors Investment shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

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

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

Whitestone REIT has higher earnings, but lower revenue 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 Recommendations

This is a breakdown of current ratings for Whitestone REIT and Two Harbors Investment, as reported by MarketBeat.

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

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

Profitability

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

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

Volatility and Risk

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

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.