STORE Capital Corporation (STOR) and PS Business Parks (PSB) Critical Contrast

STORE Capital Corporation (NYSE: STOR) and PS Business Parks (NYSE:PSB) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, institutional ownership, earnings and risk.

Institutional & Insider Ownership

72.3% of PS Business Parks shares are held by institutional investors. 0.9% of STORE Capital Corporation shares are held by insiders. Comparatively, 1.6% of PS Business Parks shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

STORE Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 5.0%. PS Business Parks pays an annual dividend of $3.40 per share and has a dividend yield of 2.5%. STORE Capital Corporation pays out 126.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PS Business Parks pays out 111.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. STORE Capital Corporation has increased its dividend for 3 consecutive years. STORE Capital Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares STORE Capital Corporation and PS Business Parks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
STORE Capital Corporation 38.71% 5.98% 3.10%
PS Business Parks 39.05% 16.50% 7.61%

Valuation and Earnings

This table compares STORE Capital Corporation and PS Business Parks’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
STORE Capital Corporation $421.32 million 11.24 $381.86 million $0.98 25.47
PS Business Parks $394.93 million 9.36 $261.16 million $3.06 44.41

STORE Capital Corporation has higher revenue and earnings than PS Business Parks. STORE Capital Corporation is trading at a lower price-to-earnings ratio than PS Business Parks, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

STORE Capital Corporation has a beta of 0.23, meaning that its stock price is 77% less volatile than the S&P 500. Comparatively, PS Business Parks has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for STORE Capital Corporation and PS Business Parks, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
STORE Capital Corporation 0 4 7 0 2.64
PS Business Parks 1 1 0 0 1.50

STORE Capital Corporation currently has a consensus price target of $27.06, suggesting a potential upside of 8.40%. PS Business Parks has a consensus price target of $107.00, suggesting a potential downside of 21.27%. Given STORE Capital Corporation’s stronger consensus rating and higher probable upside, research analysts plainly believe STORE Capital Corporation is more favorable than PS Business Parks.

Summary

PS Business Parks beats STORE Capital Corporation on 9 of the 17 factors compared between the two stocks.

STORE Capital Corporation Company Profile

STORE Capital Corporation is an internally managed net-lease real estate investment trust. The Company is engaged in the acquisition, investment and management of single tenant operational real estate (STORE) properties. As of December 31, 2016, the Company owned a portfolio that consisted of investments in 1,660 property locations operated by 360 customers across 48 states. Its customers operate across a range of industries within the service, retail and manufacturing sectors of the United States economy, with restaurants, early childhood education centers, movie theaters, health clubs and furniture stores. The Company’s portfolio includes investments in approximately 1,330 property locations operated by over 300 customers across approximately 50 states. The Company provides real estate financing solutions principally to businesses that own STORE properties and operate within the broad-based service, retail and industrial sectors of the United States economy.

PS Business Parks Company Profile

PS Business Parks, Inc. is a self-advised and self-managed real estate investment trust (REIT). The Company owns, operates and develops commercial properties, primarily multi-tenant flex, office and industrial parks. It focuses on owning concentrated business parks. PS Business Parks, L.P. (the Operating Partnership) is a California limited partnership, which owns directly or indirectly substantially all of its assets and through, which the Company conducts substantially all of its business. PSB is the partner of the Operating Partnership and, as of December 31, 2016, owned 77.9% of the common partnership units. The remaining common partnership units are owned by Public Storage (PS). As of December 31, 2016, the Company owned and operated 28.1 million rentable square feet of commercial space, comprising 99 business parks, in the states, including California, Texas, Virginia, Florida, Maryland and Washington. It also manages 684,000 rentable square feet on behalf of PS.

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