Critical Review: Sunstone Hotel Investors (NYSE:SHO) versus LTC Properties (NYSE:LTC)

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

Dividends

Sunstone Hotel Investors pays an annual dividend of $0.36 per share and has a dividend yield of 3.7%. LTC Properties pays an annual dividend of $2.28 per share and has a dividend yield of 5.8%. Sunstone Hotel Investors pays out 900.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. LTC Properties pays out 93.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sunstone Hotel Investors has raised its dividend for 2 consecutive years. LTC Properties is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

99.4% of Sunstone Hotel Investors shares are owned by institutional investors. Comparatively, 69.3% of LTC Properties shares are owned by institutional investors. 1.4% of Sunstone Hotel Investors shares are owned by insiders. Comparatively, 2.0% of LTC Properties shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Sunstone Hotel Investors and LTC Properties’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sunstone Hotel Investors	2.56%	1.44%	0.81%
LTC Properties	44.82%	10.95%	6.14%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Sunstone Hotel Investors and LTC Properties, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sunstone Hotel Investors	3	4	3	0	2.00
LTC Properties	0	4	2	1	2.57

Sunstone Hotel Investors presently has a consensus price target of $9.63, suggesting a potential downside of 1.03%. LTC Properties has a consensus price target of $39.60, suggesting a potential upside of 1.50%. Given LTC Properties’ stronger consensus rating and higher possible upside, analysts plainly believe LTC Properties is more favorable than Sunstone Hotel Investors.

Earnings & Valuation

This table compares Sunstone Hotel Investors and LTC Properties”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sunstone Hotel Investors	$960.13 million	1.92	$24.57 million	$0.04	243.13
LTC Properties	$262.85 million	7.35	$117.97 million	$2.44	15.99

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

Volatility & Risk

Sunstone Hotel Investors has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, LTC Properties has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Summary

LTC Properties beats Sunstone Hotel Investors on 12 of the 18 factors compared between the two stocks.

About Sunstone Hotel Investors

Sunstone Hotel Investors, Inc. is a lodging real estate investment trust ("REIT") that as of the date of this release owns 14 hotels comprised of 6,675 rooms, the majority of which are operated under nationally recognized brands. Sunstone's strategy is to create long-term stakeholder value through the acquisition, active ownership, and disposition of well-located hotel and resort real estate.

About LTC Properties

LTC Properties, Inc. is a real estate investment trust, which engages in managing seniors housing and health care properties. It operates through the Texas, Michigan, Florida, Wisconsin, Colorado, and Remaining States geographic segments. The company was founded by Andre C. Dimitriadis on May 12, 1992 and is headquartered in Westlake Village, CA.