DiamondRock Hospitality (NYSE:DRH) and Equity Residential (NYSE:EQR) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Earnings & Valuation

This table compares DiamondRock Hospitality and Equity Residential’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DiamondRock Hospitality $870.01 million 2.80 $91.87 million $1.00 11.71
Equity Residential $2.47 billion 9.87 $603.45 million $3.13 21.16

Equity Residential has higher revenue and earnings than DiamondRock Hospitality. DiamondRock Hospitality is trading at a lower price-to-earnings ratio than Equity Residential, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

DiamondRock Hospitality has a beta of 1.41, meaning that its stock price is 41% more volatile than the S&P 500. Comparatively, Equity Residential has a beta of 0.37, meaning that its stock price is 63% less volatile than the S&P 500.

Dividends

DiamondRock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.3%. Equity Residential pays an annual dividend of $2.16 per share and has a dividend yield of 3.3%. DiamondRock Hospitality pays out 50.0% of its earnings in the form of a dividend. Equity Residential pays out 69.0% 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. DiamondRock Hospitality is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares DiamondRock Hospitality and Equity Residential’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DiamondRock Hospitality 9.26% 4.26% 2.53%
Equity Residential 23.27% 5.63% 2.87%

Analyst Recommendations

This is a breakdown of current recommendations for DiamondRock Hospitality and Equity Residential, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DiamondRock Hospitality 2 2 4 0 2.25
Equity Residential 0 11 4 0 2.27

DiamondRock Hospitality presently has a consensus price target of $12.04, suggesting a potential upside of 2.83%. Equity Residential has a consensus price target of $67.57, suggesting a potential upside of 2.01%. Given DiamondRock Hospitality’s higher possible upside, analysts clearly believe DiamondRock Hospitality is more favorable than Equity Residential.

Insider & Institutional Ownership

87.3% of Equity Residential shares are held by institutional investors. 1.1% of DiamondRock Hospitality shares are held by insiders. Comparatively, 3.8% of Equity Residential shares are held by 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.

Summary

Equity Residential beats DiamondRock Hospitality on 11 of the 15 factors compared between the two stocks.

About DiamondRock Hospitality

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 30 premium quality hotels with over 9,900 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment.

About Equity Residential

Equity Residential is an S&P 500 company focused on the acquisition, development and management of rental apartment properties in urban and high-density suburban coastal gateway markets where today's renters want to live, work and play. Equity Residential owns or has investments in 304 properties consisting of 78,645 apartment units, primarily located in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California.

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