Orion Office REIT (NYSE:ONL) vs. Service Properties Trust (NASDAQ:SVC) Critical Analysis

Service Properties Trust (NASDAQ:SVC) and Orion Office REIT (NYSE:ONL) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, valuation, profitability, earnings, dividends, analyst recommendations and institutional ownership.

Dividends

Service Properties Trust pays an annual dividend of $0.04 per share and has a dividend yield of 2.0%. Orion Office REIT pays an annual dividend of $0.08 per share and has a dividend yield of 4.0%. Service Properties Trust pays out -2.4% of its earnings in the form of a dividend. Orion Office REIT pays out -3.3% 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. Orion Office REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Service Properties Trust has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500. Comparatively, Orion Office REIT has a beta of 1.4, suggesting that its stock price is 40% more volatile than the S&P 500.

Institutional & Insider Ownership

77.6% of Service Properties Trust shares are held by institutional investors. Comparatively, 80.0% of Orion Office REIT shares are held by institutional investors. 1.4% of Service Properties Trust shares are held by company insiders. Comparatively, 0.8% of Orion Office REIT shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Service Properties Trust and Orion Office REIT”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Service Properties Trust	$1.90 billion	0.18	-$275.53 million	($1.67)	-1.22
Orion Office REIT	$164.86 million	0.69	-$103.01 million	($2.44)	-0.83

Orion Office REIT has lower revenue, but higher earnings than Service Properties Trust. Service Properties Trust is trading at a lower price-to-earnings ratio than Orion Office REIT, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Service Properties Trust and Orion Office REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Service Properties Trust	1	2	0	1	2.25
Orion Office REIT	1	2	0	0	1.67

Service Properties Trust presently has a consensus target price of $2.50, indicating a potential upside of 22.55%. Given Service Properties Trust’s stronger consensus rating and higher possible upside, analysts plainly believe Service Properties Trust is more favorable than Orion Office REIT.

Profitability

This table compares Service Properties Trust and Orion Office REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Service Properties Trust	-14.83%	-37.94%	-3.97%
Orion Office REIT	-90.36%	-18.73%	-10.53%

Summary

Service Properties Trust beats Orion Office REIT on 9 of the 16 factors compared between the two stocks.

About Service Properties Trust

Service Properties Trust (Nasdaq: SVC) is a real estate investment trust with over $11 billion invested in two asset categories: hotels and service-focused retail net lease properties. As of December 31, 2023, SVC owned 221 hotels with over 37,000 guest rooms throughout the United States and in Puerto Rico and Canada, the majority of which are extended stay and select service. As of December 31, 2023, SVC also owned 752 service-focused retail net lease properties totaling approximately 13.3 million square feet throughout the United States. SVC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $41 billion in assets under management as of December 31, 2023, and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA.

About Orion Office REIT

Orion Office REIT specializes in the ownership, acquisition and management of a diversified portfolio of mission-critical and corporate headquarters office buildings in high-quality suburban markets across the U.S. The portfolio is leased primarily on a single-tenant net lease basis to creditworthy tenants. The company's team of experienced industry leaders employs a proven, cycle-tested investment evaluation framework which serves as the lens through which capital allocation decisions are made for the current portfolio and future acquisitions.