Critical Analysis: Starwood Property Trust (NYSE:STWD) and Healthcare Realty Trust (NYSE:HR)

Starwood Property Trust (NYSE:STWD) and Healthcare Realty Trust (NYSE:HR) are both mid-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, dividends and profitability.

Insider and Institutional Ownership

49.8% of Starwood Property Trust shares are held by institutional investors. 5.8% of Starwood Property Trust shares are held by insiders. Comparatively, 0.6% of Healthcare Realty Trust shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Risk and Volatility

Starwood Property Trust has a beta of 1.7, meaning that its share price is 70% more volatile than the S&P 500. Comparatively, Healthcare Realty Trust has a beta of 0.91, meaning that its share price is 9% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Starwood Property Trust	17.05%	10.03%	0.98%
Healthcare Realty Trust	-42.79%	-8.50%	-4.52%

Valuation and Earnings

This table compares Starwood Property Trust and Healthcare Realty Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starwood Property Trust	$2.05 billion	3.06	$339.21 million	$1.09	18.14
Healthcare Realty Trust	$1.32 billion	5.16	-$278.26 million	($1.33)	-13.47

Starwood Property Trust has higher revenue and earnings than Healthcare Realty Trust. Healthcare Realty Trust 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.

Dividends

Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 9.7%. Healthcare Realty Trust pays an annual dividend of $1.24 per share and has a dividend yield of 6.9%. Starwood Property Trust pays out 176.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Healthcare Realty Trust pays out -93.2% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent recommendations for Starwood Property Trust and Healthcare Realty Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starwood Property Trust	0	3	4	1	2.75
Healthcare Realty Trust	1	4	1	0	2.00

Starwood Property Trust currently has a consensus price target of $22.36, indicating a potential upside of 12.07%. Healthcare Realty Trust has a consensus price target of $17.17, indicating a potential downside of 4.20%. Given Starwood Property Trust’s stronger consensus rating and higher probable upside, equities analysts plainly believe Starwood Property Trust is more favorable than Healthcare Realty Trust.

Summary

Starwood Property Trust beats Healthcare Realty Trust on 15 of the 17 factors compared between the two stocks.

About Starwood Property Trust

Starwood Property Trust, Inc. operates as a real estate investment trust (REIT) in the United States and internationally. The company operates through Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing segments. The Commercial and Residential Lending segment originates, acquires, finances, and manages commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), and residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, include distressed or non-performing loans. The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments. The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment. The Investing and Servicing segment manages and works out problem assets; acquires and manages unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions; originates conduit loans for the primary purpose of selling these loans into securitization transactions; and acquires commercial real estate assets that include properties acquired from CMBS trusts. The company qualifies as a REIT for federal income tax purposes and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2009 and is headquartered in Greenwich, Connecticut.

About Healthcare Realty Trust

Healthcare Realty (NYSE: HR) is a real estate investment trust (REIT) that owns and operates medical outpatient buildings primarily located around market-leading hospital campuses. The Company selectively grows its portfolio through property acquisition and development. As the first and largest REIT to specialize in medical outpatient buildings, Healthcare Realty's portfolio includes more than 700 properties totaling over 40 million square feet concentrated in 15 growth markets.