Uniti Group (NASDAQ:UNIT) & Two Harbors Investment (NYSE:TWO) Critical Analysis

Uniti Group (NASDAQ:UNIT) and Two Harbors Investment (NYSE:TWO) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, earnings, profitability, institutional ownership, risk, valuation and analyst recommendations.

Insider & Institutional Ownership

87.5% of Uniti Group shares are held by institutional investors. Comparatively, 64.2% of Two Harbors Investment shares are held by institutional investors. 1.4% of Uniti Group shares are held by insiders. Comparatively, 0.6% of Two Harbors Investment 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.

Profitability

This table compares Uniti Group and Two Harbors Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Uniti Group	8.82%	-4.12%	2.02%
Two Harbors Investment	-87.84%	4.45%	0.55%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Uniti Group and Two Harbors Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Uniti Group	0	1	2	0	2.67
Two Harbors Investment	0	4	4	0	2.50

Uniti Group presently has a consensus target price of $7.17, indicating a potential upside of 17.29%. Two Harbors Investment has a consensus target price of $14.32, indicating a potential upside of 21.99%. Given Two Harbors Investment’s higher probable upside, analysts clearly believe Two Harbors Investment is more favorable than Uniti Group.

Valuation and Earnings

This table compares Uniti Group and Two Harbors Investment”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Uniti Group	$1.15 billion	1.30	-$81.71 million	$0.41	14.90
Two Harbors Investment	$480.36 million	2.53	-$106.37 million	($4.82)	-2.44

Uniti Group has higher revenue and earnings than Two Harbors Investment. Two Harbors Investment is trading at a lower price-to-earnings ratio than Uniti Group, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Uniti Group has a beta of 1.31, meaning that its stock price is 31% more volatile than the S&P 500. Comparatively, Two Harbors Investment has a beta of 1.87, meaning that its stock price is 87% more volatile than the S&P 500.

Dividends

Uniti Group pays an annual dividend of $0.45 per share and has a dividend yield of 7.4%. Two Harbors Investment pays an annual dividend of $1.80 per share and has a dividend yield of 15.3%. Uniti Group pays out 109.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investment pays out -37.3% of its earnings in the form of a dividend. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Uniti Group beats Two Harbors Investment on 9 of the 16 factors compared between the two stocks.

About Uniti Group

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of fiber and other wireless solutions for the communications industry. As of December 31, 2023, Uniti owns approximately 140,000 fiber route miles, 8.5 million fiber strand miles, and other communications real estate throughout the United States.

About Two Harbors Investment

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.