Critical Analysis: American Assets Trust (NYSE:AAT) & Highwoods Properties (NYSE:HIW)

American Assets Trust (NYSE:AAT) and Highwoods Properties (NYSE:HIW) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, risk, profitability and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for American Assets Trust and Highwoods Properties, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Assets Trust 0 0 4 0 3.00
Highwoods Properties 0 1 3 0 2.75

American Assets Trust presently has a consensus price target of $49.50, suggesting a potential upside of 5.81%. Highwoods Properties has a consensus price target of $50.00, suggesting a potential upside of 5.29%. Given American Assets Trust’s stronger consensus rating and higher possible upside, equities research analysts plainly believe American Assets Trust is more favorable than Highwoods Properties.

Volatility and Risk

American Assets Trust has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500. Comparatively, Highwoods Properties has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500.

Dividends

American Assets Trust pays an annual dividend of $1.12 per share and has a dividend yield of 2.4%. Highwoods Properties pays an annual dividend of $1.90 per share and has a dividend yield of 4.0%. American Assets Trust pays out 53.6% of its earnings in the form of a dividend. Highwoods Properties pays out 55.1% 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.

Valuation and Earnings

This table compares American Assets Trust and Highwoods Properties’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Assets Trust $330.87 million 8.48 $27.20 million $2.09 22.38
Highwoods Properties $720.03 million 6.84 $171.83 million $3.45 13.77

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

Institutional & Insider Ownership

96.4% of American Assets Trust shares are owned by institutional investors. Comparatively, 94.7% of Highwoods Properties shares are owned by institutional investors. 37.3% of American Assets Trust shares are owned by company insiders. Comparatively, 1.9% of Highwoods Properties 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.

Profitability

This table compares American Assets Trust and Highwoods Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Assets Trust 11.29% 3.77% 1.59%
Highwoods Properties 17.85% 5.93% 2.72%

American Assets Trust Company Profile

American Assets Trust, Inc. (the “company”) is a full service, vertically integrated and self-administered real estate investment trust, or REIT, headquartered in San Diego, California. The company has over 50 years of experience in acquiring, improving, developing and managing premier retail, office and residential properties throughout the United States in some of the nation's most dynamic, high-barrier-to-entry markets primarily in Southern California, Northern California, Oregon, Washington, Texas and Hawaii. The company's retail portfolio comprises approximately 3.1 million rentable square feet, and its office portfolio comprises approximately 2.7 million square feet. In addition, the company owns one mixed-use property (including approximately 97,000 rentable square feet of retail space and a 369-room all-suite hotel) and 2,112 multifamily units. In 2011, the company was formed to succeed to the real estate business of American Assets, Inc., a privately held corporation founded in 1967 and, as such, has significant experience, long-standing relationships and extensive knowledge of its core markets, submarkets and asset classes.

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.

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