Two Harbors Investment (NYSE: TWO) and American Campus Communities (NYSE:ACC) are both mid-cap financials companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, risk, profitability, valuation, analyst recommendations and earnings.

Analyst Ratings

This is a breakdown of current recommendations for Two Harbors Investment and American Campus Communities, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Two Harbors Investment 0 2 4 0 2.67
American Campus Communities 1 5 8 0 2.50

Two Harbors Investment currently has a consensus target price of $17.92, indicating a potential upside of 12.05%. American Campus Communities has a consensus target price of $50.00, indicating a potential upside of 26.14%. Given American Campus Communities’ higher possible upside, analysts clearly believe American Campus Communities is more favorable than Two Harbors Investment.

Valuation & Earnings

This table compares Two Harbors Investment and American Campus Communities’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Two Harbors Investment $633.49 million 4.40 $353.27 million $2.90 5.51
American Campus Communities $786.36 million 6.88 $99.06 million $0.41 96.69

Two Harbors Investment has higher earnings, but lower revenue than American Campus Communities. Two Harbors Investment is trading at a lower price-to-earnings ratio than American Campus Communities, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Two Harbors Investment and American Campus Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Two Harbors Investment 63.23% 10.27% 1.52%
American Campus Communities 7.16% 1.58% 0.89%

Dividends

Two Harbors Investment pays an annual dividend of $2.10 per share and has a dividend yield of 13.1%. American Campus Communities pays an annual dividend of $1.76 per share and has a dividend yield of 4.4%. Two Harbors Investment pays out 72.4% of its earnings in the form of a dividend. American Campus Communities pays out 429.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Campus Communities has increased its dividend for 5 consecutive years. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Two Harbors Investment has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500. Comparatively, American Campus Communities has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500.

Summary

Two Harbors Investment beats American Campus Communities on 9 of the 15 factors compared between the two stocks.

Two Harbors Investment Company Profile

Two Harbors Investment Corp. is a real estate investment trust. The Company is focused on investing in, financing and managing residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR), commercial real estate and other financial assets (collectively known as target assets). Its investment objective is to provide attractive risk-adjusted total return to its stockholders over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk. The Company finances its RMBS and commercial real estate assets through short- and long-term borrowings structured as repurchase agreements and advances from the Federal Home Loan Bank of Des Moines, or the FHLB. It also finances its MSR through revolving credit facilities.

American Campus Communities Company Profile

American Campus Communities, Inc. is a self-managed and self-administered equity real estate investment trust (REIT). The Company’s segments include Wholly-Owned Properties, On-Campus Participating Properties, Development Services, and Property Management Services. It is engaged in the acquisition, design, financing, development, construction management, leasing and management of student housing properties. The Wholly-Owned Properties segment consists of off-campus properties, which are located in close proximity to the school campus. The On-Campus Participating Properties segment includes on-campus properties that are operated under long-term ground/facility leases with three university systems. The Development Services segment consists of development and construction management services that it provides through one of its taxable REIT subsidiaries for third-party owners. The Property Management Services segment includes revenues generated from third-party management contracts.

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