NexPoint Real Estate Finance (NYSE:NREF – Get Rating) and Retail Opportunity Investments (NASDAQ:ROIC – Get Rating) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, risk, institutional ownership, earnings, valuation and profitability.
Profitability
This table compares NexPoint Real Estate Finance and Retail Opportunity Investments’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| NexPoint Real Estate Finance | 61.05% | 15.94% | 0.47% |
| Retail Opportunity Investments | 19.81% | 4.26% | 1.99% |
Risk & Volatility
NexPoint Real Estate Finance has a beta of 1.56, meaning that its stock price is 56% more volatile than the S&P 500. Comparatively, Retail Opportunity Investments has a beta of 1.38, meaning that its stock price is 38% more volatile than the S&P 500.
Insider and Institutional Ownership
74.3% of NexPoint Real Estate Finance shares are owned by institutional investors. Comparatively, 96.2% of Retail Opportunity Investments shares are owned by institutional investors. 48.0% of NexPoint Real Estate Finance shares are owned by insiders. Comparatively, 2.8% of Retail Opportunity Investments shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.
Analyst Ratings
This is a summary of recent recommendations for NexPoint Real Estate Finance and Retail Opportunity Investments, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| NexPoint Real Estate Finance | 0 | 0 | 1 | 1 | 3.50 |
| Retail Opportunity Investments | 1 | 1 | 1 | 0 | 2.00 |
NexPoint Real Estate Finance currently has a consensus target price of $24.00, suggesting a potential downside of 0.04%. Retail Opportunity Investments has a consensus target price of $19.00, suggesting a potential upside of 6.80%. Given Retail Opportunity Investments’ higher probable upside, analysts plainly believe Retail Opportunity Investments is more favorable than NexPoint Real Estate Finance.
Earnings and Valuation
This table compares NexPoint Real Estate Finance and Retail Opportunity Investments’ revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| NexPoint Real Estate Finance | $55.83 million | 6.27 | $43.08 million | $3.48 | 6.90 |
| Retail Opportunity Investments | $284.10 million | 7.78 | $53.51 million | $0.47 | 37.85 |
Retail Opportunity Investments has higher revenue and earnings than NexPoint Real Estate Finance. NexPoint Real Estate Finance is trading at a lower price-to-earnings ratio than Retail Opportunity Investments, indicating that it is currently the more affordable of the two stocks.
Dividends
NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 8.3%. Retail Opportunity Investments pays an annual dividend of $0.52 per share and has a dividend yield of 2.9%. NexPoint Real Estate Finance pays out 57.5% of its earnings in the form of a dividend. Retail Opportunity Investments pays out 110.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Real Estate Finance has increased its dividend for 2 consecutive years and Retail Opportunity Investments has increased its dividend for 1 consecutive years. NexPoint Real Estate Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Summary
NexPoint Real Estate Finance beats Retail Opportunity Investments on 10 of the 17 factors compared between the two stocks.
About NexPoint Real Estate Finance (Get Rating)
NexPoint Real Estate Finance, Inc. operates as a real estate finance company in the United States. It focuses on originating, structuring, and investing in first mortgage loans, mezzanine loans, preferred equity, and preferred stock, as well as multifamily commercial mortgage backed securities securitizations. The company intends to qualify as a real estate investment trust for U.S. federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2019 and is based in Dallas, Texas.
About Retail Opportunity Investments (Get Rating)
Retail Opportunity Investments Corp. (NASDAQ: ROIC), is a fully-integrated, self-managed real estate investment trust (REIT) that specializes in the acquisition, ownership and management of grocery-anchored shopping centers located in densely populated, metropolitan markets across the West Coast. As of September 30, 2020, ROIC owned 88 shopping centers encompassing approximately 10.1 million square feet. ROIC is the largest publicly-traded, grocery-anchored shopping center REIT focused exclusively on the West Coast. ROIC is a member of the S&P SmallCap 600 Index and has investment-grade corporate debt ratings from Moody’s Investor Services, S&P Global Ratings, and Fitch Ratings, Inc.
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