Two Harbors Investment (NYSE:TWO) and Broadstone Net Lease (NYSE:BNL) Critical Analysis

Two Harbors Investment (NYSE:TWO) and Broadstone Net Lease (NYSE:BNL) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, earnings, valuation, risk, profitability and dividends.

Volatility and Risk

Two Harbors Investment has a beta of 1.85, meaning that its share price is 85% more volatile than the S&P 500. Comparatively, Broadstone Net Lease has a beta of 1.1, meaning that its share price is 10% more volatile than the S&P 500.

Insider and Institutional Ownership

64.2% of Two Harbors Investment shares are held by institutional investors. Comparatively, 89.1% of Broadstone Net Lease shares are held by institutional investors. 0.6% of Two Harbors Investment shares are held by company insiders. Comparatively, 0.6% of Broadstone Net Lease shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Two Harbors Investment and Broadstone Net Lease’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investment	-87.84%	4.45%	0.55%
Broadstone Net Lease	33.56%	4.47%	2.71%

Earnings and Valuation

This table compares Two Harbors Investment and Broadstone Net Lease”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investment	$480.36 million	2.55	-$106.37 million	($4.82)	-2.46
Broadstone Net Lease	$424.67 million	7.50	$155.48 million	$0.76	22.24

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

Dividends

Two Harbors Investment pays an annual dividend of $1.80 per share and has a dividend yield of 15.2%. Broadstone Net Lease pays an annual dividend of $1.16 per share and has a dividend yield of 6.9%. Two Harbors Investment pays out -37.3% of its earnings in the form of a dividend. Broadstone Net Lease pays out 152.6% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Two Harbors Investment and Broadstone Net Lease, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investment	0	3	4	0	2.57
Broadstone Net Lease	1	4	2	0	2.14

Two Harbors Investment presently has a consensus price target of $13.71, indicating a potential upside of 15.78%. Broadstone Net Lease has a consensus price target of $18.20, indicating a potential upside of 7.69%. Given Two Harbors Investment’s stronger consensus rating and higher probable upside, equities analysts plainly believe Two Harbors Investment is more favorable than Broadstone Net Lease.

Summary

Broadstone Net Lease beats Two Harbors Investment on 9 of the 16 factors compared between the two stocks.

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.

About Broadstone Net Lease

Broadstone Net Lease, Inc. (the Corporation) is a Maryland corporation formed on October 18, 2007, that elected to be taxed as a real estate investment trust (REIT) commencing with the taxable year ended December 31, 2008. Broadstone Net Lease, LLC (the Corporation’s operating company, or the OP), is the entity through which the Corporation conducts its business and owns (either directly or through subsidiaries) all of the Corporation’s properties. The Corporation is the sole managing member of the OP. The membership units not owned by the Corporation are referred to as OP Units or non-controlling interests. As the Corporation conducts substantially all of its operations through the OP, it is structured as what is referred to as an umbrella partnership real estate investment trust (UPREIT). The Corporation’s common stock is listed on the New York Stock Exchange under the symbol BNL.