Government Properties Income Trust (GOV) vs. Resource Capital (RSO) Financial Review

Government Properties Income Trust (NASDAQ: GOV) and Resource Capital (NYSE:RSO) are both small-cap financials companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, dividends, risk, institutional ownership, profitability, analyst recommendations and valuation.

Dividends

Government Properties Income Trust pays an annual dividend of $1.72 per share and has a dividend yield of 10.7%. Resource Capital pays an annual dividend of $0.20 per share and has a dividend yield of 2.3%. Government Properties Income Trust pays out 312.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Resource Capital pays out 16.1% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent recommendations and price targets for Government Properties Income Trust and Resource Capital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Government Properties Income Trust 2 1 2 0 2.00
Resource Capital 0 3 0 0 2.00

Government Properties Income Trust presently has a consensus target price of $18.75, suggesting a potential upside of 17.11%. Resource Capital has a consensus target price of $11.50, suggesting a potential upside of 31.88%. Given Resource Capital’s higher possible upside, analysts plainly believe Resource Capital is more favorable than Government Properties Income Trust.

Volatility and Risk

Government Properties Income Trust has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500. Comparatively, Resource Capital has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500.

Insider and Institutional Ownership

58.4% of Government Properties Income Trust shares are held by institutional investors. Comparatively, 50.9% of Resource Capital shares are held by institutional investors. 2.7% of Government Properties Income Trust shares are held by insiders. Comparatively, 4.8% of Resource Capital shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Government Properties Income Trust and Resource Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Government Properties Income Trust 15.30% 4.27% 1.66%
Resource Capital 63.00% -1.23% -0.44%

Valuation & Earnings

This table compares Government Properties Income Trust and Resource Capital’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Government Properties Income Trust $258.18 million 6.15 $57.84 million $0.55 29.11
Resource Capital $62.68 million 4.37 -$30.36 million $1.24 7.03

Government Properties Income Trust has higher revenue and earnings than Resource Capital. Resource Capital is trading at a lower price-to-earnings ratio than Government Properties Income Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Government Properties Income Trust beats Resource Capital on 9 of the 15 factors compared between the two stocks.

Government Properties Income Trust Company Profile

Government Properties Income Trust is a real estate investment trust (REIT). The Company operates through two segments: ownership of properties that are primarily leased to government tenants and its equity method investment in Select Income REIT (SIR). The Company’s properties are located in areas, including Alabama, Arizona, California, Colorado, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Hampshire, New Jersey and New Mexico. As of December 31, 2016, the Company owned 73 properties (95 buildings). As of December 31, 2016, the Company’s properties were located in 31 states and the District of Columbia, and contained approximately 11.4 million rentable square feet.

Resource Capital Company Profile

Resource Capital Corp. is a real estate finance company. The Company operates through four segments: Commercial Real Estate Debt Investments, Commercial Finance, Residential Mortgage Lending and Corporate & Other. The Commercial Real Estate Debt Investments segment includes the Company’s activities and operations related to commercial real estate loans, commercial real estate-related securities and investments in real estate. The Commercial Finance segment includes the Company’s activities and operations related to syndicated corporate loans, syndicated corporate loan-related securities and direct financing leases. The Residential Mortgage Lending segment includes the Company’s activities and operations related to the investment in residential mortgage-backed securities (RMBS).

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