Sunstone Hotel Investors (NYSE: SHO) and RLJ Lodging Trust (NYSE:RLJ) are both mid-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, valuation, analyst recommendations and dividends.

Earnings and Valuation

This table compares Sunstone Hotel Investors and RLJ Lodging Trust’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Sunstone Hotel Investors $1.19 billion 2.99 $134.19 million $0.67 23.58
RLJ Lodging Trust $1.16 billion 3.27 $200.35 million $1.13 19.17

RLJ Lodging Trust has lower revenue, but higher earnings than Sunstone Hotel Investors. RLJ Lodging Trust is trading at a lower price-to-earnings ratio than Sunstone Hotel Investors, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

95.2% of RLJ Lodging Trust shares are owned by institutional investors. 0.8% of Sunstone Hotel Investors shares are owned by insiders. Comparatively, 2.3% of RLJ Lodging Trust shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Sunstone Hotel Investors and RLJ Lodging Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sunstone Hotel Investors 13.78% 6.20% 3.98%
RLJ Lodging Trust 12.30% 5.80% 3.04%

Dividends

Sunstone Hotel Investors pays an annual dividend of $2.32 per share and has a dividend yield of 14.7%. RLJ Lodging Trust pays an annual dividend of $1.32 per share and has a dividend yield of 6.1%. Sunstone Hotel Investors pays out 346.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RLJ Lodging Trust pays out 116.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sunstone Hotel Investors has raised its dividend for 7 consecutive years. Sunstone Hotel Investors is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Sunstone Hotel Investors has a beta of 1.05, indicating that its stock price is 5% more volatile than the S&P 500. Comparatively, RLJ Lodging Trust has a beta of 1.1, indicating that its stock price is 10% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for Sunstone Hotel Investors and RLJ Lodging Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sunstone Hotel Investors 3 8 2 0 1.92
RLJ Lodging Trust 1 5 5 0 2.36

Sunstone Hotel Investors currently has a consensus price target of $16.06, indicating a potential upside of 1.62%. RLJ Lodging Trust has a consensus price target of $23.45, indicating a potential upside of 8.29%. Given RLJ Lodging Trust’s stronger consensus rating and higher possible upside, analysts plainly believe RLJ Lodging Trust is more favorable than Sunstone Hotel Investors.

Summary

RLJ Lodging Trust beats Sunstone Hotel Investors on 10 of the 17 factors compared between the two stocks.

About Sunstone Hotel Investors

Sunstone Hotel Investors, Inc. operates as a self-managed and self-administered real estate investment trust (REIT). The Company’s primary business is to acquire, own, asset manage and renovate primarily urban and resort upper upscale hotels in the United States. The Company operates through hotel ownership segment. The Company owns primarily urban and resort upper upscale hotels in the United States. The Company’s hotels are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. As of January 10, 2018, the Company has interest in 25 hotels, including 12,450 rooms. The Company’s hotels are located in gateway markets, such as Boston, New York, Washington, District of Columbia (DC)/Baltimore, Chicago, Orlando, New Orleans, San Francisco, Los Angeles, Orange County and San Diego.

About RLJ Lodging Trust

RLJ Lodging Trust is a self-administered real estate investment trust. The Company is engaged in the acquisition of focused-service and compact full-service hotels. As of December 31, 2016, the Company owned 122 hotels with approximately 20,100 rooms, located in 21 states and the District of Columbia, and an interest in one mortgage loan secured by a hotel. Its hotels’ brand affiliations include Residence Inn, Courtyard, SpringHill Suites, Fairfield Inn & Suites, Marriott, Renaissance, Hilton Garden Inn, Hampton Inn/Hampton Inn & Suites, Embassy Suites, DoubleTree, Homewood Suites, Hilton, Hyatt House, Hyatt Place and Hyatt/Hyatt Centric. Its operating partnership is RLJ Lodging Trust, L.P. Its properties include Courtyard San Francisco, Courtyard Boulder Longmont, Residence Inn Longmont Boulder, DoubleTree Grand Key Resort, Courtyard Atlanta Buckhead, Courtyard Chicago Southeast Hammond, Courtyard Louisville Northeast, DoubleTree Hotel Columbia and Residence Inn Detroit Novi.

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