Comparing ARMOUR Residential REIT (NYSE:ARR) & Diversified Healthcare Trust (NASDAQ:DHC)

Diversified Healthcare Trust (NASDAQ:DHC) and ARMOUR Residential REIT (NYSE:ARR) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, valuation, analyst recommendations, profitability, institutional ownership, earnings and risk.

Institutional and Insider Ownership

76.0% of Diversified Healthcare Trust shares are owned by institutional investors. Comparatively, 54.2% of ARMOUR Residential REIT shares are owned by institutional investors. 1.4% of Diversified Healthcare Trust shares are owned by company insiders. Comparatively, 0.4% of ARMOUR Residential REIT shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Diversified Healthcare Trust and ARMOUR Residential REIT”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Diversified Healthcare Trust	$1.41 billion	0.41	-$293.57 million	($1.61)	-1.50
ARMOUR Residential REIT	$552.90 million	1.88	-$67.92 million	$2.36	7.92

ARMOUR Residential REIT has lower revenue, but higher earnings than Diversified Healthcare Trust. Diversified Healthcare Trust is trading at a lower price-to-earnings ratio than ARMOUR Residential REIT, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations for Diversified Healthcare Trust and ARMOUR Residential REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Diversified Healthcare Trust	1	1	1	0	2.00
ARMOUR Residential REIT	0	4	0	0	2.00

Diversified Healthcare Trust presently has a consensus target price of $4.50, suggesting a potential upside of 86.72%. ARMOUR Residential REIT has a consensus target price of $19.83, suggesting a potential upside of 6.12%. Given Diversified Healthcare Trust’s higher possible upside, analysts plainly believe Diversified Healthcare Trust is more favorable than ARMOUR Residential REIT.

Dividends

Diversified Healthcare Trust pays an annual dividend of $0.04 per share and has a dividend yield of 1.7%. ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 15.4%. Diversified Healthcare Trust pays out -2.5% of its earnings in the form of a dividend. ARMOUR Residential REIT pays out 122.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Diversified Healthcare Trust and ARMOUR Residential REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Diversified Healthcare Trust	-26.09%	-17.55%	-7.20%
ARMOUR Residential REIT	24.17%	16.76%	1.74%

Risk & Volatility

Diversified Healthcare Trust has a beta of 2.23, meaning that its stock price is 123% more volatile than the S&P 500. Comparatively, ARMOUR Residential REIT has a beta of 1.51, meaning that its stock price is 51% more volatile than the S&P 500.

Summary

ARMOUR Residential REIT beats Diversified Healthcare Trust on 8 of the 15 factors compared between the two stocks.

About Diversified Healthcare Trust

DHC is a real estate investment trust, or REIT, focused on owning high-quality healthcare properties located throughout the United States. DHC seeks diversification across the health services spectrum by care delivery and practice type, by scientific research disciplines and by property type and location. As of December 31, 2023, DHC's approximately $7.2 billion portfolio included 371 properties in 36 states and Washington, D.C., occupied by approximately 500 tenants, and totaling approximately 8.6 million square feet of life science and medical office properties and more than 27,000 senior living units. DHC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $41 billion in assets under management as of December 31, 2023 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. DHC is headquartered in Newton, MA.

About ARMOUR Residential REIT

ARMOUR Residential REIT, Inc. invests in residential mortgage-backed securities (MBS) in the United States. Its securities portfolio primarily consists of the United States Government-sponsored entity's (GSE) and the Government National Mortgage Administration's issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans; and unsecured notes and bonds issued by the GSE and the United States treasuries, as well as money market instruments. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. ARMOUR Residential REIT, Inc. was incorporated in 2008 and is based in Vero Beach, Florida.