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

Insider and Institutional Ownership

74.3% of City Office REIT shares are held by institutional investors. 0.9% of DiamondRock Hospitality shares are held by insiders. Comparatively, 3.0% of City Office REIT shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares DiamondRock Hospitality and City Office REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DiamondRock Hospitality 10.44% 4.90% 2.89%
City Office REIT -7.39% -3.51% -0.96%

Dividends

DiamondRock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.6%. City Office REIT pays an annual dividend of $0.94 per share and has a dividend yield of 7.8%. DiamondRock Hospitality pays out 49.0% of its earnings in the form of a dividend. City Office REIT pays out 87.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares DiamondRock Hospitality and City Office REIT’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DiamondRock Hospitality $863.70 million 2.54 $87.78 million $1.02 10.66
City Office REIT $129.48 million 3.68 $38.17 million $1.08 11.12

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

Volatility & Risk

DiamondRock Hospitality has a beta of 1.43, indicating that its stock price is 43% more volatile than the S&P 500. Comparatively, City Office REIT has a beta of 0.52, indicating that its stock price is 48% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for DiamondRock Hospitality and City Office REIT, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DiamondRock Hospitality 4 4 1 0 1.67
City Office REIT 0 1 4 0 2.80

DiamondRock Hospitality currently has a consensus target price of $10.41, indicating a potential downside of 4.31%. City Office REIT has a consensus target price of $13.70, indicating a potential upside of 14.07%. Given City Office REIT’s stronger consensus rating and higher possible upside, analysts plainly believe City Office REIT is more favorable than DiamondRock Hospitality.

Summary

City Office REIT beats DiamondRock Hospitality on 9 of the 16 factors compared between the two stocks.

DiamondRock Hospitality Company Profile

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 31 premium quality hotels with over 10,000 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.

City Office REIT Company Profile

City Office REIT, Inc. (NYSE: CIO) invests in high-quality office properties in 18-hour cities with strong economic fundamentals, primarily in the Southern and Western United States. At December 31, 2018, CIO owned office complexes comprising 5.7 million square feet of net rentable area (“NRA”).

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