NorthStar Realty Europe Corp. (NYSE: NRE) and City Office REIT (NYSE:CIO) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.

Analyst Recommendations

This is a breakdown of current ratings and price targets for NorthStar Realty Europe Corp. and City Office REIT, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NorthStar Realty Europe Corp. 0 0 3 0 3.00
City Office REIT 0 1 3 0 2.75

NorthStar Realty Europe Corp. presently has a consensus price target of $16.83, suggesting a potential upside of 20.07%. City Office REIT has a consensus price target of $14.67, suggesting a potential upside of 13.96%. Given NorthStar Realty Europe Corp.’s stronger consensus rating and higher possible upside, research analysts clearly believe NorthStar Realty Europe Corp. is more favorable than City Office REIT.

Profitability

This table compares NorthStar Realty Europe Corp. and City Office REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NorthStar Realty Europe Corp. -14.48% 7.74% 2.46%
City Office REIT 3.65% 1.91% 0.46%

Institutional and Insider Ownership

71.1% of NorthStar Realty Europe Corp. shares are held by institutional investors. Comparatively, 54.8% of City Office REIT shares are held by institutional investors. 2.2% of NorthStar Realty Europe Corp. shares are held by insiders. Comparatively, 3.2% of City Office REIT shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares NorthStar Realty Europe Corp. and City Office REIT’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
NorthStar Realty Europe Corp. $151.21 million 5.14 -$61.75 million ($0.35) -40.06
City Office REIT $72.46 million 5.37 -$840,000.00 ($0.17) -75.71

City Office REIT has higher revenue, but lower earnings than NorthStar Realty Europe Corp.. City Office REIT is trading at a lower price-to-earnings ratio than NorthStar Realty Europe Corp., indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

NorthStar Realty Europe Corp. has a beta of 2.5, suggesting that its stock price is 150% more volatile than the S&P 500. Comparatively, City Office REIT has a beta of 0.22, suggesting that its stock price is 78% less volatile than the S&P 500.

Dividends

NorthStar Realty Europe Corp. pays an annual dividend of $0.60 per share and has a dividend yield of 4.3%. City Office REIT pays an annual dividend of $0.94 per share and has a dividend yield of 7.3%. NorthStar Realty Europe Corp. pays out -171.4% of its earnings in the form of a dividend. City Office REIT pays out -552.9% 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. City Office REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

About NorthStar Realty Europe Corp.

NorthStar Realty Europe Corp. is a real estate investment trust (REIT). The Company is a European focused commercial real estate company with primary office properties in cities within Germany, the United Kingdom and France. Its objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time. The Company conducts its business through two segments: Real Estate and Corporate. Its European commercial real estate business is primarily focused on office properties. Its portfolio consists of approximately 48 properties and a total of approximately 495,588 square meters of rentable space, located in various European markets, including Frankfurt, Hamburg, Berlin, London, Paris, Amsterdam, Milan, Brussels and Madrid. Its overall portfolio is over 87% occupied. In addition, it owns over two hotels, which are leased to third-party operators. It is externally managed and advised by an affiliate of NorthStar Asset Management Group Inc. (NSAM).

About City Office REIT

City Office REIT, Inc. is a real estate investment trust. The Company is focused on acquiring, owning and operating office properties located primarily in metropolitan areas in the Southern and Western United States. It conducts its operations primarily through City Office REIT Operating Partnership, L.P. (the Operating Partnership). As of December 31, 2016, it owned 18 office complexes consisting of 37 office buildings with a total of approximately 4.4 million square feet of net rentable area (NRA) in the metropolitan areas of Boise, Dallas, Denver, Orlando, Phoenix, Portland and Tampa. Its properties include Park Tower, City Center, Intellicenter and Carillon Point in Tampa, Florida; Cherry Creek, Plaza 25, DTC Crossroads, Superior Pointe and Logan Tower in Denver, Colorado; Washington Group Plaza in Boise, Idaho; FRP Collection, Central Fairwinds and FRP Ingenuity Drive in Orlando, Florida; 190 Office Center and Lake Vista Pointe in Dallas, Texas, and SanTan in Phoenix, Arizona.

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