Comparing Redwood Trust (NYSE:RWT) & LTC Properties (NYSE:LTC)

LTC Properties (NYSE:LTC) and Redwood Trust (NYSE:RWT) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Profitability

This table compares LTC Properties and Redwood Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LTC Properties	46.78%	10.22%	5.06%
Redwood Trust	4.45%	4.93%	0.37%

Volatility & Risk

LTC Properties has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 1.58, suggesting that its share price is 58% more volatile than the S&P 500.

Insider and Institutional Ownership

69.3% of LTC Properties shares are owned by institutional investors. Comparatively, 74.3% of Redwood Trust shares are owned by institutional investors. 2.0% of LTC Properties shares are owned by company insiders. Comparatively, 2.5% of Redwood Trust shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

LTC Properties pays an annual dividend of $2.28 per share and has a dividend yield of 6.2%. Redwood Trust pays an annual dividend of $0.68 per share and has a dividend yield of 8.8%. LTC Properties pays out 118.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Redwood Trust pays out 971.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of current ratings for LTC Properties and Redwood Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LTC Properties	0	1	1	0	2.50
Redwood Trust	0	3	5	1	2.78

LTC Properties presently has a consensus target price of $37.00, indicating a potential upside of 0.86%. Redwood Trust has a consensus target price of $8.08, indicating a potential upside of 4.57%. Given Redwood Trust’s stronger consensus rating and higher probable upside, analysts clearly believe Redwood Trust is more favorable than LTC Properties.

Earnings & Valuation

This table compares LTC Properties and Redwood Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LTC Properties	$200.98 million	7.94	$89.74 million	$1.92	19.11
Redwood Trust	$724.00 million	1.41	-$2.27 million	$0.07	110.43

LTC Properties has higher earnings, but lower revenue than Redwood Trust. LTC Properties is trading at a lower price-to-earnings ratio than Redwood Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Redwood Trust beats LTC Properties on 10 of the 17 factors compared between the two stocks.

About LTC Properties

LTC is a real estate investment trust (REIT) investing in seniors housing and health care properties primarily through sale-leasebacks, mortgage financing, joint-ventures and structured finance solutions including preferred equity and mezzanine lending. LTC's investment portfolio includes 201 properties in 26 states with 29 operating partners. Based on its gross real estate investments, LTC's investment portfolio is comprised of approximately 50% seniors housing and 50% skilled nursing properties.

About Redwood Trust

Redwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through three segments: Residential Consumer Mortgage Banking, Residential Investor Mortgage Banking, and Investment Portfolio. The Residential Consumer Mortgage Banking segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans. The Residential Investor Mortgage Banking segment operates a platform that originates business purpose loans to investors in single-family and multifamily residential properties and bridge loans for subsequent securitization, sale, or transfer into its investment portfolio. The Investment Portfolio segment invests in securities retained from residential consumer and investor securitization activities, and business purpose lending bridge loans, as well as residential mortgage-backed securities issued by third parties, Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations, servicer advance investments, home equity investments, and other housing-related investments. The company is elected to be taxed as a real estate investment trust (REIT) for federal income tax purposes. Redwood Trust, Inc. was incorporated in 1994 and is headquartered in Mill Valley, California.