CYS Investments (NYSE: CYS) and Starwood Property Trust (NYSE:STWD) are both mortgage reits companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, analyst recommendations, profitability, institutional ownership, risk, dividends and earnings.

Dividends

CYS Investments pays an annual dividend of $1.00 per share and has a dividend yield of 12.5%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 8.9%. CYS Investments pays out -500.0% of its earnings in the form of a dividend. Starwood Property Trust pays out 115.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CYS Investments is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares CYS Investments and Starwood Property Trust’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
CYS Investments $294.54 million 4.20 $16.39 million ($0.20) -39.90
Starwood Property Trust $784.67 million 7.17 $365.18 million $1.66 12.98

Starwood Property Trust has higher revenue and earnings than CYS Investments. CYS Investments 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.

Profitability

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

Net Margins Return on Equity Return on Assets
CYS Investments -2.59% 13.30% 1.37%
Starwood Property Trust 52.28% 11.88% 0.79%

Volatility & Risk

CYS Investments has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for CYS Investments and Starwood Property Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CYS Investments 1 3 0 0 1.75
Starwood Property Trust 0 1 2 0 2.67

CYS Investments currently has a consensus price target of $8.00, suggesting a potential upside of 0.25%. Starwood Property Trust has a consensus price target of $24.00, suggesting a potential upside of 11.37%. Given Starwood Property Trust’s stronger consensus rating and higher probable upside, analysts plainly believe Starwood Property Trust is more favorable than CYS Investments.

Insider and Institutional Ownership

61.3% of CYS Investments shares are held by institutional investors. Comparatively, 68.0% of Starwood Property Trust shares are held by institutional investors. 1.0% of CYS Investments shares are held by insiders. Comparatively, 2.4% of Starwood Property Trust shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Starwood Property Trust beats CYS Investments on 11 of the 16 factors compared between the two stocks.

CYS Investments Company Profile

CYS Investments, Inc. is a specialty finance company. The Company’s objective is to provide consistent returns to its investors through a combination of dividends and capital appreciation. It invests in agency residential mortgage-backed security (RMBS) collateralized by fixed rate single-family residential mortgage loans; adjustable-rate mortgages (ARMs), which have coupon rates that reset monthly, or hybrid ARMs, which have a coupon rate that is fixed for an initial period. In addition, it has investments in collateralized mortgage obligations issued by a government agency or government-sponsored entity (GSE) that are collateralized by Agency RMBS. Its investments consist of residential mortgage pass-through securities for which the principal and interest payments are guaranteed by a GSE, such as Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, or by the United States Government agency, such as Government National Mortgage Association.

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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