Safehold (NYSE:SAFE) vs. City Office REIT (NYSE:CIO) Critical Review

Safehold (NYSE:SAFE) and City Office REIT (NYSE:CIO) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, profitability and dividends.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Safehold	32.08%	4.79%	1.66%
City Office REIT	-5.56%	-1.48%	-0.65%

Valuation & Earnings

This table compares Safehold and City Office REIT”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Safehold	$376.84 million	3.52	-$54.97 million	$1.70	10.91
City Office REIT	$173.53 million	1.28	-$2.68 million	($0.42)	-13.14

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

Analyst Recommendations

This is a summary of current recommendations for Safehold and City Office REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Safehold	0	4	4	0	2.50
City Office REIT	0	0	0	0	0.00

Safehold currently has a consensus price target of $27.63, indicating a potential upside of 48.92%. Given Safehold’s stronger consensus rating and higher possible upside, analysts plainly believe Safehold is more favorable than City Office REIT.

Institutional and Insider Ownership

70.4% of Safehold shares are held by institutional investors. Comparatively, 67.5% of City Office REIT shares are held by institutional investors. 3.3% of Safehold shares are held by company insiders. Comparatively, 3.9% of City Office REIT shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Safehold has a beta of 1.66, suggesting that its stock price is 66% more volatile than the S&P 500. Comparatively, City Office REIT has a beta of 1.98, suggesting that its stock price is 98% more volatile than the S&P 500.

Dividends

Safehold pays an annual dividend of $0.70 per share and has a dividend yield of 3.8%. City Office REIT pays an annual dividend of $0.40 per share and has a dividend yield of 7.2%. Safehold pays out 41.2% of its earnings in the form of a dividend. City Office REIT pays out -95.2% 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. City Office REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Safehold beats City Office REIT on 11 of the 16 factors compared between the two stocks.

About Safehold

Safehold Inc. (NYSE: SAFE) is revolutionizing real estate ownership by providing a new and better way for owners to unlock the value of the land beneath their buildings. Having created the modern ground lease industry in 2017, Safehold continues to help owners of high quality multifamily, office, industrial, hospitality, student housing, life science and mixed-use properties generate higher returns with less risk. The Company, which is taxed as a real estate investment trust (REIT), seeks to deliver safe, growing income and long-term capital appreciation to its shareholders.

About City Office REIT

City Office REIT is an internally-managed real estate company focused on acquiring, owning and operating high-quality office properties located predominantly in Sun Belt markets. City Office currently owns or has a controlling interest in 5.7 million square feet of office properties. The Company has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.