Critical Review: Highwoods Properties (HIW) & Equity Residential (EQR)

Highwoods Properties (NYSE: HIW) and Equity Residential (NYSE:EQR) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitability, earnings, institutional ownership, valuation and risk.

Institutional and Insider Ownership

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96.5% of Highwoods Properties shares are owned by institutional investors. Comparatively, 94.2% of Equity Residential shares are owned by institutional investors. 2.0% of Highwoods Properties shares are owned by insiders. Comparatively, 3.8% of Equity Residential shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and price targets for Highwoods Properties and Equity Residential, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Highwoods Properties 0 3 2 0 2.40
Equity Residential 1 10 6 0 2.29

Highwoods Properties currently has a consensus target price of $51.67, suggesting a potential upside of 20.29%. Equity Residential has a consensus target price of $66.38, suggesting a potential upside of 7.66%. Given Highwoods Properties’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Highwoods Properties is more favorable than Equity Residential.

Volatility and Risk

Highwoods Properties has a beta of 0.74, indicating that its stock price is 26% less volatile than the S&P 500. Comparatively, Equity Residential has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Highwoods Properties $702.74 million 6.31 $185.36 million $3.28 13.09
Equity Residential $2.47 billion 9.18 $603.45 million $3.13 19.70

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

Profitability

This table compares Highwoods Properties and Equity Residential’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Highwoods Properties 26.20% 8.46% 4.03%
Equity Residential 24.39% 5.76% 2.92%

Dividends

Highwoods Properties pays an annual dividend of $1.85 per share and has a dividend yield of 4.3%. Equity Residential pays an annual dividend of $2.16 per share and has a dividend yield of 3.5%. Highwoods Properties pays out 56.4% of its earnings in the form of a dividend. Equity Residential pays out 69.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Highwoods Properties is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Highwoods Properties beats Equity Residential on 10 of the 16 factors compared between the two stocks.

Highwoods Properties Company Profile

Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW) real estate investment trust (?REIT?) and a member of the S&P MidCap 400 Index. The Company is a fully-integrated office REIT that 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. For more information about Highwoods, please visit our website at www.highwoods.com.

Equity Residential Company Profile

Equity Residential is an S&P 500 company focused on the acquisition, development and management of rental apartment properties in urban and high-density suburban coastal gateway markets where today's renters want to live, work and play. Equity Residential owns or has investments in 305 properties consisting of 78,611 apartment units, primarily located in Boston, New York, Washington, D.C., Seattle, San Francisco and Southern California. For more information on Equity Residential, please visit our website at www.equityapartments.com.

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