Highwoods Properties (NYSE:HIW) versus Terreno Realty (NYSE:TRNO) Critical Analysis

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

Profitability

This table compares Terreno Realty and Highwoods Properties’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Terreno Realty	72.41%	8.27%	6.41%
Highwoods Properties	15.98%	5.48%	2.13%

Analyst Recommendations

This is a summary of current ratings and price targets for Terreno Realty and Highwoods Properties, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Terreno Realty	1	6	6	0	2.38
Highwoods Properties	1	4	2	0	2.14

Terreno Realty currently has a consensus price target of $65.54, indicating a potential upside of 11.61%. Highwoods Properties has a consensus price target of $31.00, indicating a potential upside of 20.02%. Given Highwoods Properties’ higher possible upside, analysts clearly believe Highwoods Properties is more favorable than Terreno Realty.

Dividends

Terreno Realty pays an annual dividend of $2.08 per share and has a dividend yield of 3.5%. Highwoods Properties pays an annual dividend of $2.00 per share and has a dividend yield of 7.7%. Terreno Realty pays out 66.0% of its earnings in the form of a dividend. Highwoods Properties pays out 170.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Terreno Realty has increased its dividend for 5 consecutive years.

Volatility & Risk

Terreno Realty has a beta of 1.13, suggesting that its stock price is 13% more volatile than the S&P 500. Comparatively, Highwoods Properties has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500.

Earnings & Valuation

This table compares Terreno Realty and Highwoods Properties”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Terreno Realty	$382.62 million	15.87	$184.50 million	$3.15	18.64
Highwoods Properties	$808.28 million	3.51	$102.25 million	$1.17	22.08

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

Insider and Institutional Ownership

96.3% of Highwoods Properties shares are held by institutional investors. 2.4% of Terreno Realty shares are held by company insiders. Comparatively, 1.9% of Highwoods Properties shares are held by company 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

Terreno Realty beats Highwoods Properties on 12 of the 17 factors compared between the two stocks.

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.

About Highwoods Properties

Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW), fully-integrated office real estate investment trust (REIT) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. Highwoods is in the work-placemaking business. We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders.