Critical Review: Diversified Healthcare Trust (NASDAQ:DHC) and Terreno Realty (NYSE:TRNO)

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

Valuation and Earnings

This table compares Diversified Healthcare Trust and Terreno Realty”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Diversified Healthcare Trust	$1.54 billion	1.49	-$285.89 million	($1.33)	-7.14
Terreno Realty	$476.38 million	14.72	$402.99 million	$4.09	16.12

Terreno Realty has lower revenue, but higher earnings than Diversified Healthcare Trust. Diversified Healthcare Trust is trading at a lower price-to-earnings ratio than Terreno Realty, indicating that it is currently the more affordable of the two stocks.

Dividends

Diversified Healthcare Trust pays an annual dividend of $0.04 per share and has a dividend yield of 0.4%. Terreno Realty pays an annual dividend of $2.08 per share and has a dividend yield of 3.2%. Diversified Healthcare Trust pays out -3.0% of its earnings in the form of a dividend. Terreno Realty pays out 50.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Terreno Realty has increased its dividend for 5 consecutive years. Terreno Realty is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Diversified Healthcare Trust	-21.10%	-18.75%	-7.09%
Terreno Realty	86.44%	10.35%	7.98%

Risk & Volatility

Diversified Healthcare Trust has a beta of 2.32, indicating that its stock price is 132% more volatile than the S&P 500. Comparatively, Terreno Realty has a beta of 1.05, indicating that its stock price is 5% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Diversified Healthcare Trust and Terreno Realty, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Diversified Healthcare Trust	1	2	2	1	2.50
Terreno Realty	2	2	8	1	2.62

Diversified Healthcare Trust presently has a consensus price target of $9.83, indicating a potential upside of 3.57%. Terreno Realty has a consensus price target of $69.21, indicating a potential upside of 4.97%. Given Terreno Realty’s stronger consensus rating and higher possible upside, analysts clearly believe Terreno Realty is more favorable than Diversified Healthcare Trust.

Insider and Institutional Ownership

76.0% of Diversified Healthcare Trust shares are held by institutional investors. 10.2% of Diversified Healthcare Trust shares are held by insiders. Comparatively, 1.9% of Terreno Realty shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Terreno Realty beats Diversified Healthcare Trust on 12 of the 17 factors compared between the two stocks.

About Diversified Healthcare Trust

Diversified Healthcare Trust is a real estate investment trust, which engages in the ownership of senior living communities, medical office buildings, and wellness centers. It operates through the following segments: Office Portfolio, Senior Housing Operating Portfolio (SHOP), and Non-Segment. The Office Portfolio segment consists of medical office properties leased to medical providers and other medical related businesses, as well as life science properties leased to biotech laboratories and other similar tenants. The SHOP segment manages senior living communities that offers short term and long term residential care, and other services for residents where it pay fees to the operator to manage the communities for its account. The company was founded on December 16, 1998 and is headquartered in Newton, MA.

About Terreno Realty

Terreno Realty Corporation (Terreno, and together with its subsidiaries, the Company) acquires, owns and operates industrial real estate in six major coastal U.S. markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. All square feet, acres, occupancy and number of properties disclosed in these notes to the consolidated financial statements are unaudited. As of December 31, 2023, the Company owned 259 buildings aggregating approximately 16.0 million square feet, 45 improved land parcels consisting of approximately 152.4 acres, seven properties under development or redevelopment and approximately 62.7 acres of land entitled for future development. The Company is an internally managed Maryland corporation and elected to be taxed as a real estate investment trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the Code), commencing with its taxable year ended December 31, 2010.