Highwoods Properties (HIW) and City Office REIT (CIO) Critical Review

Highwoods Properties (NYSE: HIW) and City Office REIT (NYSE:CIO) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, analyst recommendations, profitability, dividends, institutional ownership, earnings and valuation.

Valuation and Earnings

This table compares Highwoods Properties and City Office REIT’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Highwoods Properties $683.61 million 7.90 $366.80 million $1.24 42.19
City Office REIT $90.65 million 4.32 $47.13 million ($0.13) -99.46

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

Dividends

Highwoods Properties pays an annual dividend of $1.76 per share and has a dividend yield of 3.4%. City Office REIT pays an annual dividend of $0.94 per share and has a dividend yield of 7.3%. Highwoods Properties pays out 141.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. City Office REIT pays out -723.1% of its earnings in the form of a dividend. City Office REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

Net Margins Return on Equity Return on Assets
Highwoods Properties 18.79% 5.96% 2.82%
City Office REIT 3.70% 1.91% 0.51%

Risk & Volatility

Highwoods Properties has a beta of 0.88, indicating that its stock price is 12% less volatile than the S&P 500. Comparatively, City Office REIT has a beta of 0.22, indicating that its stock price is 78% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for Highwoods Properties and City Office REIT, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Highwoods Properties 0 2 2 0 2.50
City Office REIT 0 1 3 0 2.75

Highwoods Properties presently has a consensus price target of $54.67, indicating a potential upside of 4.49%. City Office REIT has a consensus price target of $14.83, indicating a potential upside of 14.72%. Given City Office REIT’s stronger consensus rating and higher possible upside, analysts clearly believe City Office REIT is more favorable than Highwoods Properties.

Insider and Institutional Ownership

98.4% of Highwoods Properties shares are held by institutional investors. Comparatively, 53.0% of City Office REIT shares are held by institutional investors. 1.9% of Highwoods Properties shares are held by insiders. Comparatively, 3.2% of City Office REIT shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Highwoods Properties beats City Office REIT on 10 of the 16 factors compared between the two stocks.

Highwoods Properties Company Profile

Highwoods Properties, Inc. is an office real estate investment trust (REIT). The Company’s primary business is the operation, acquisition and development of office properties. The Company’s segments include Office and Other. The Company owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Greensboro, Memphis, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. The Company conducts its activities through Highwoods Realty Limited Partnership (the Operating Partnership). The Company offers a range of real estate services to its customers. The Company offers services, including asset management, construction management, design and space planning, and renovation and re-positioning. The Company provides its customers with services, such as build-to-suit construction and space modification, including tenant improvements and expansions.

City Office REIT Company Profile

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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