Reviewing NexPoint Residential Trust (NXRT) & Equity Lifestyle Properties (ELS)

NexPoint Residential Trust (NYSE: NXRT) and Equity Lifestyle Properties (NYSE:ELS) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.

Valuation and Earnings

This table compares NexPoint Residential Trust and Equity Lifestyle Properties’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
NexPoint Residential Trust $137.90 million 3.56 $57.99 million $0.51 45.75
Equity Lifestyle Properties $897.06 million 8.39 $426.41 million $2.01 43.03

Equity Lifestyle Properties has higher revenue and earnings than NexPoint Residential Trust. Equity Lifestyle Properties is trading at a lower price-to-earnings ratio than NexPoint Residential Trust, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares NexPoint Residential Trust and Equity Lifestyle Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NexPoint Residential Trust 9.27% 5.39% 1.26%
Equity Lifestyle Properties 22.00% 20.64% 5.66%

Dividends

NexPoint Residential Trust pays an annual dividend of $0.88 per share and has a dividend yield of 3.8%. Equity Lifestyle Properties pays an annual dividend of $1.95 per share and has a dividend yield of 2.3%. NexPoint Residential Trust pays out 172.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Equity Lifestyle Properties pays out 97.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Residential Trust has raised its dividend for 6 consecutive years. NexPoint Residential Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

57.6% of NexPoint Residential Trust shares are held by institutional investors. Comparatively, 95.7% of Equity Lifestyle Properties shares are held by institutional investors. 16.6% of NexPoint Residential Trust shares are held by insiders. Comparatively, 6.1% of Equity Lifestyle Properties shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and price targets for NexPoint Residential Trust and Equity Lifestyle Properties, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NexPoint Residential Trust 0 1 2 0 2.67
Equity Lifestyle Properties 1 2 0 0 1.67

NexPoint Residential Trust presently has a consensus price target of $28.00, suggesting a potential upside of 20.02%. Equity Lifestyle Properties has a consensus price target of $83.33, suggesting a potential downside of 3.65%. Given NexPoint Residential Trust’s stronger consensus rating and higher possible upside, research analysts clearly believe NexPoint Residential Trust is more favorable than Equity Lifestyle Properties.

Volatility and Risk

NexPoint Residential Trust has a beta of 0.83, suggesting that its stock price is 17% less volatile than the S&P 500. Comparatively, Equity Lifestyle Properties has a beta of 0.32, suggesting that its stock price is 68% less volatile than the S&P 500.

Summary

Equity Lifestyle Properties beats NexPoint Residential Trust on 9 of the 17 factors compared between the two stocks.

NexPoint Residential Trust Company Profile

NexPoint Residential Trust, Inc. is an externally managed real estate investment trust (REIT). The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. The Company is focused on multifamily investments primarily located in the Southeastern and Southwestern United States. All of the Company’s business operations are conducted through NexPoint Residential Trust Operating Partnership, L.P. (OP). The sole limited partner of the OP is the Company. Its subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC, is the sole general partner of the OP. As of December 31, 2016, the Company owned 39 properties representing 12,965 units in eight states, including two Parked Assets. The Company’s advisor is NexPoint Real Estate Advisors, L.P.

Equity Lifestyle Properties Company Profile

Equity LifeStyle Properties, Inc. is a real estate investment trust (REIT). The Company is an owner and operator of lifestyle-oriented properties (properties) consisting primarily of manufactured home (MH) communities and recreational vehicle (RV) resorts and campgrounds. The Company operates through two segments: Property Operations and Home Sales and Rentals Operations. The Property Operations segment owns and operates land lease properties and the Home Sales and Rentals Operations segment purchases, sells and leases homes at the properties. It leases individual developed areas (sites) with access to utilities for placement of factory built homes, cottages, cabins or RVs. As of December 31, 2016, the Company’s property portfolio included 391 properties consisted of 146,610 residential sites. Its properties are designed for home options of various sizes and designs that are produced off-site by third-party manufacturers, installed and set on designated sites within the properties.

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