Contrasting Uniti Group (NASDAQ:UNIT) & Two Harbors Investment (NYSE:TWO)

Two Harbors Investment (NYSE:TWO) and Uniti Group (NASDAQ:UNIT) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, profitability, risk, earnings, institutional ownership, analyst recommendations and dividends.

Dividends

Two Harbors Investment pays an annual dividend of $1.80 per share and has a dividend yield of 15.2%. Uniti Group pays an annual dividend of $0.45 per share and has a dividend yield of 7.5%. Two Harbors Investment pays out -37.3% of its earnings in the form of a dividend. Uniti Group pays out 109.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

64.2% of Two Harbors Investment shares are owned by institutional investors. Comparatively, 87.5% of Uniti Group shares are owned by institutional investors. 0.6% of Two Harbors Investment shares are owned by company insiders. Comparatively, 1.4% of Uniti Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and target prices for Two Harbors Investment and Uniti Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investment	0	4	4	0	2.50
Uniti Group	0	1	2	0	2.67

Two Harbors Investment presently has a consensus price target of $14.18, indicating a potential upside of 20.06%. Uniti Group has a consensus price target of $7.17, indicating a potential upside of 18.85%. Given Two Harbors Investment’s higher possible upside, analysts clearly believe Two Harbors Investment is more favorable than Uniti Group.

Volatility and Risk

Two Harbors Investment has a beta of 1.87, meaning that its stock price is 87% more volatile than the S&P 500. Comparatively, Uniti Group has a beta of 1.31, meaning that its stock price is 31% more volatile than the S&P 500.

Earnings and Valuation

This table compares Two Harbors Investment and Uniti Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investment	-$255.29 million	-4.79	-$106.37 million	($4.82)	-2.45
Uniti Group	$1.15 billion	1.28	-$81.71 million	$0.41	14.71

Uniti Group has higher revenue and earnings than Two Harbors Investment. Two Harbors Investment is trading at a lower price-to-earnings ratio than Uniti Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Two Harbors Investment and Uniti Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investment	-87.84%	4.45%	0.55%
Uniti Group	8.82%	-4.12%	2.02%

Summary

Uniti Group beats Two Harbors Investment on 10 of the 16 factors compared between the two stocks.

About Two Harbors Investment

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About Uniti Group

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of fiber and other wireless solutions for the communications industry. As of December 31, 2023, Uniti owns approximately 140,000 fiber route miles, 8.5 million fiber strand miles, and other communications real estate throughout the United States.