Redwood Trust (NYSE:RWT – Get Free Report) and KKR Real Estate Finance Trust (NYSE:KREF – Get Free Report) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, profitability, risk, analyst recommendations, dividends, institutional ownership and valuation.
Risk and Volatility
Redwood Trust has a beta of 1.59, indicating that its stock price is 59% more volatile than the S&P 500. Comparatively, KKR Real Estate Finance Trust has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500.
Dividends
Redwood Trust pays an annual dividend of $0.68 per share and has a dividend yield of 9.4%. KKR Real Estate Finance Trust pays an annual dividend of $1.00 per share and has a dividend yield of 8.5%. Redwood Trust pays out 123.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR Real Estate Finance Trust pays out -333.3% of its earnings in the form of a dividend.
Earnings and Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Redwood Trust | $724.00 million | 1.32 | -$2.27 million | $0.55 | 13.09 |
| KKR Real Estate Finance Trust | $640.41 million | 1.27 | -$30.85 million | ($0.30) | -39.07 |
Redwood Trust has higher revenue and earnings than KKR Real Estate Finance Trust. KKR Real Estate Finance Trust is trading at a lower price-to-earnings ratio than Redwood Trust, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a summary of current ratings and recommmendations for Redwood Trust and KKR Real Estate Finance Trust, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Redwood Trust | 0 | 3 | 5 | 1 | 2.78 |
| KKR Real Estate Finance Trust | 0 | 0 | 6 | 0 | 3.00 |
Redwood Trust currently has a consensus target price of $8.19, suggesting a potential upside of 13.81%. KKR Real Estate Finance Trust has a consensus target price of $12.83, suggesting a potential upside of 9.50%. Given Redwood Trust’s higher possible upside, equities research analysts plainly believe Redwood Trust is more favorable than KKR Real Estate Finance Trust.
Institutional & Insider Ownership
74.3% of Redwood Trust shares are owned by institutional investors. Comparatively, 70.2% of KKR Real Estate Finance Trust shares are owned by institutional investors. 2.5% of Redwood Trust shares are owned by company insiders. Comparatively, 1.6% of KKR Real Estate Finance Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Profitability
This table compares Redwood Trust and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Redwood Trust | 9.35% | 6.01% | 0.43% |
| KKR Real Estate Finance Trust | 0.40% | 9.46% | 1.86% |
Summary
Redwood Trust beats KKR Real Estate Finance Trust on 12 of the 17 factors compared between the two stocks.
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.
About KKR Real Estate Finance Trust
KKR Real Estate Finance Trust Inc., a mortgage real estate investment trust, focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets. It engages in the origination and purchase of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans. The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. KKR Real Estate Finance Trust Inc. was incorporated in 2014 and is headquartered in New York, New York.
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