Invesco Mortgage Capital (NYSE: IVR) and Starwood Property Trust (NYSE:STWD) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, valuation, dividends, profitability, institutional ownership, earnings and analyst recommendations.
Invesco Mortgage Capital pays an annual dividend of $1.64 per share and has a dividend yield of 8.8%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 8.8%. Invesco Mortgage Capital pays out 44.1% of its earnings in the form of a dividend. Starwood Property Trust pays out 116.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
This table compares Invesco Mortgage Capital and Starwood Property Trust’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Invesco Mortgage Capital||66.86%||9.06%||1.09%|
|Starwood Property Trust||52.28%||11.88%||0.79%|
Valuation & Earnings
This table compares Invesco Mortgage Capital and Starwood Property Trust’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Invesco Mortgage Capital||$456.86 million||4.55||$254.41 million||$3.72||5.01|
|Starwood Property Trust||$784.67 million||7.25||$365.18 million||$1.65||13.21|
Starwood Property Trust has higher revenue and earnings than Invesco Mortgage Capital. Invesco Mortgage Capital 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.
This is a summary of recent recommendations and price targets for Invesco Mortgage Capital and Starwood Property Trust, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Invesco Mortgage Capital||0||2||2||0||2.50|
|Starwood Property Trust||0||0||2||0||3.00|
Invesco Mortgage Capital currently has a consensus price target of $18.13, suggesting a potential downside of 2.76%. Starwood Property Trust has a consensus price target of $24.00, suggesting a potential upside of 10.09%. Given Starwood Property Trust’s stronger consensus rating and higher possible upside, analysts clearly believe Starwood Property Trust is more favorable than Invesco Mortgage Capital.
Insider & Institutional Ownership
63.2% of Invesco Mortgage Capital shares are held by institutional investors. Comparatively, 67.5% of Starwood Property Trust shares are held by institutional investors. 0.3% of Invesco Mortgage Capital shares are held by company insiders. Comparatively, 2.4% of Starwood Property Trust shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Risk and Volatility
Invesco Mortgage Capital has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 0.51, meaning that its share price is 49% less volatile than the S&P 500.
Starwood Property Trust beats Invesco Mortgage Capital on 9 of the 15 factors compared between the two stocks.
Invesco Mortgage Capital Company Profile
Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.
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.
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