Starwood Property Trust (NYSE: STWD) and Capstead Mortgage (NYSE:CMO) are both financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, risk, institutional ownership and earnings.

Insider & Institutional Ownership

67.4% of Starwood Property Trust shares are held by institutional investors. Comparatively, 73.0% of Capstead Mortgage shares are held by institutional investors. 2.4% of Starwood Property Trust shares are held by insiders. Comparatively, 1.7% of Capstead Mortgage shares are held 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.

Valuation & Earnings

This table compares Starwood Property Trust and Capstead Mortgage’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Starwood Property Trust $784.67 million 6.98 $365.18 million $1.66 12.63
Capstead Mortgage $213.33 million 4.00 $82.87 million $0.60 14.80

Starwood Property Trust has higher revenue and earnings than Capstead Mortgage. Starwood Property Trust is trading at a lower price-to-earnings ratio than Capstead Mortgage, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Starwood Property Trust and Capstead Mortgage’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Starwood Property Trust 52.28% 11.88% 0.79%
Capstead Mortgage 29.16% 4.67% 0.48%

Risk & Volatility

Starwood Property Trust has a beta of 0.37, suggesting that its stock price is 63% less volatile than the S&P 500. Comparatively, Capstead Mortgage has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500.

Dividends

Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 9.2%. Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.6%. Starwood Property Trust pays out 115.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capstead Mortgage pays out 126.7% 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 4 consecutive years. Starwood Property Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Starwood Property Trust and Capstead Mortgage, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Starwood Property Trust 0 0 2 0 3.00
Capstead Mortgage 0 1 1 0 2.50

Starwood Property Trust presently has a consensus price target of $24.00, indicating a potential upside of 14.45%. Capstead Mortgage has a consensus price target of $11.00, indicating a potential upside of 23.87%. Given Capstead Mortgage’s higher probable upside, analysts clearly believe Capstead Mortgage is more favorable than Starwood Property Trust.

Summary

Starwood Property Trust beats Capstead Mortgage on 14 of the 17 factors compared between the two stocks.

Starwood Property Trust Company Profile

Starwood Property Trust, Inc. is a real estate investment trust. The Company operates through three business segments: Real estate lending (the Lending Segment), which engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities, and other real estate and real estate-related debt investments; Real estate investing and servicing (the Investing and Servicing Segment), which includes a servicing business in the United States that manages and works out problem assets; an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, and a mortgage loan business, and Real estate property (the Property Segment), which engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties.

Capstead Mortgage Company Profile

Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.

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