Retail Opportunity Investments (ROIC) & Select Income REIT (SIR) Critical Contrast

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Retail Opportunity Investments (NASDAQ:ROIC) and Select Income REIT (NASDAQ:SIR) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, institutional ownership, risk, earnings, analyst recommendations, dividends and profitability.

Dividends

Retail Opportunity Investments pays an annual dividend of $0.78 per share and has a dividend yield of 4.4%. Select Income REIT pays an annual dividend of $2.04 per share and has a dividend yield of 27.7%. Retail Opportunity Investments pays out 68.4% of its earnings in the form of a dividend. Select Income REIT pays out 73.4% 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. Retail Opportunity Investments has raised its dividend for 9 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings for Retail Opportunity Investments and Select Income REIT, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Retail Opportunity Investments 1 5 1 0 2.00
Select Income REIT 0 2 1 0 2.33

Retail Opportunity Investments currently has a consensus price target of $18.75, indicating a potential upside of 6.96%. Select Income REIT has a consensus price target of $26.00, indicating a potential upside of 253.26%. Given Select Income REIT’s stronger consensus rating and higher probable upside, analysts plainly believe Select Income REIT is more favorable than Retail Opportunity Investments.

Volatility and Risk

Retail Opportunity Investments has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500. Comparatively, Select Income REIT has a beta of 0.88, meaning that its share price is 12% less volatile than the S&P 500.

Earnings and Valuation

This table compares Retail Opportunity Investments and Select Income REIT’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Retail Opportunity Investments $273.26 million 7.31 $38.47 million $1.14 15.38
Select Income REIT $468.10 million 1.41 $66.90 million $2.78 2.65

Select Income REIT has higher revenue and earnings than Retail Opportunity Investments. Select Income REIT is trading at a lower price-to-earnings ratio than Retail Opportunity Investments, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Retail Opportunity Investments and Select Income REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Retail Opportunity Investments 14.69% 3.26% 1.42%
Select Income REIT 16.05% 3.33% 1.58%

Insider & Institutional Ownership

98.3% of Retail Opportunity Investments shares are owned by institutional investors. Comparatively, 50.1% of Select Income REIT shares are owned by institutional investors. 2.4% of Retail Opportunity Investments shares are owned by insiders. Comparatively, 2.1% of Select Income REIT shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Select Income REIT beats Retail Opportunity Investments on 10 of the 16 factors compared between the two stocks.

About Retail Opportunity Investments

Retail Opportunity Investments Corp. (NASDAQ:ROIC), is a fully-integrated, self-managed real estate investment trust (REIT) that specializes in the acquisition, ownership and management of grocery-anchored shopping centers located in densely-populated, metropolitan markets across the West Coast. As of September 30, 2018, ROIC owned 91 shopping centers encompassing approximately 10.5 million square feet. ROIC is the largest publicly-traded, grocery-anchored shopping center REIT focused exclusively on the West Coast. ROIC is a member of the S&P SmallCap 600 Index and has investment-grade corporate debt ratings from Moody's Investor Services and Standard & Poor's.

About Select Income REIT

SIR is a real estate investment trust, or REIT, that owns directly or indirectly through its subsidiaries, including its majority owned subsidiary, ILPT, properties that are primarily net leased to single tenants. As of September 30, 2018, our consolidated portfolio included 368 buildings, leasable land parcels and easements with approximately 45.8 million rentable square feet located in 36 states. SIR owned 99 of these buildings and leasable land parcels with approximately 16.5 million rentable square feet, which are primarily office buildings, and ILPT owned 269 of these buildings, leasable land parcels and easements with approximately 29.2 million rentable square feet, including 226 buildings, leasable land parcels and easements with approximately 16.8 million rentable square feet which are primarily leasable industrial and commercial lands located in Hawaii. ILPT was our wholly owned subsidiary until January 17, 2018, when it completed an initial public offering, or the ILPT IPO, of its common shares and became a publicly traded REIT. We remain ILPT's largest shareholder and, as of the date hereof, we own 45.0 million, or approximately 69.2%, of ILPT's outstanding common shares. Pursuant to the Merger Agreement, we will, subject to the satisfaction of certain conditions, distribute all 45.0 million of the ILPT common shares that we own to our shareholders prior to the merger. We have been investment grade rated since 2014, and we are included in the Russell 2000® Index and the MSCI US REIT Index.

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