Comparing Duke Realty (NYSE:DRE) & Redwood Trust (NYSE:RWT)

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Duke Realty (NYSE:DRE) and Redwood Trust (NYSE:RWT) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, risk, valuation, profitability, institutional ownership and earnings.

Insider & Institutional Ownership

93.4% of Duke Realty shares are held by institutional investors. Comparatively, 93.4% of Redwood Trust shares are held by institutional investors. 0.3% of Duke Realty shares are held by company insiders. Comparatively, 2.5% of Redwood Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Duke Realty and Redwood Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Duke Realty 23.14% 4.82% 2.87%
Redwood Trust 21.26% 10.71% 1.32%

Volatility and Risk

Duke Realty has a beta of 0.73, indicating that its stock price is 27% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 0.67, indicating that its stock price is 33% less volatile than the S&P 500.

Dividends

Duke Realty pays an annual dividend of $0.86 per share and has a dividend yield of 2.7%. Redwood Trust pays an annual dividend of $1.20 per share and has a dividend yield of 7.2%. Duke Realty pays out 64.7% of its earnings in the form of a dividend. Redwood Trust pays out 67.4% 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. Duke Realty has increased its dividend for 4 consecutive years.

Earnings and Valuation

This table compares Duke Realty and Redwood Trust’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Duke Realty $947.87 million 12.23 $383.73 million $1.33 24.26
Redwood Trust $453.00 million 4.14 $119.60 million $1.78 9.39

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

Analyst Recommendations

This is a breakdown of current ratings for Duke Realty and Redwood Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Duke Realty 0 2 8 0 2.80
Redwood Trust 0 0 4 0 3.00

Duke Realty presently has a consensus target price of $38.97, indicating a potential upside of 20.81%. Redwood Trust has a consensus target price of $17.88, indicating a potential upside of 6.91%. Given Duke Realty’s higher probable upside, equities analysts plainly believe Duke Realty is more favorable than Redwood Trust.

Summary

Duke Realty beats Redwood Trust on 11 of the 17 factors compared between the two stocks.

About Duke Realty

Duke Realty Corporation owns and operates approximately 153 million rentable square feet of industrial assets in 20 major logistics markets. Duke Realty Corporation is publicly traded on the NYSE under the symbol DRE and is listed on the S&P 500 Index.

About Redwood Trust

Redwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through two segments, Investment Portfolio and Residential Mortgage Banking. The Investment Portfolio segment offers a portfolio of investments in residential mortgage-backed securities retained from Sequoia securitizations, as well as issued by third parties and other credit risk-related investments; and invests directly in residential mortgage loans. The Residential Mortgage Banking segment operates a mortgage loan conduit, which acquires residential loans from third-party originators for sale, securitization, or transfer to investment portfolio. This segment also includes derivative financial instruments to manage risks associated with residential loans. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Redwood Trust, Inc. was founded in 1994 and is headquartered in Mill Valley, California.

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