Analyzing DigitalBridge Group (NYSE:DBRG) & Redwood Trust (NYSE:RWT)

DigitalBridge Group (NYSE:DBRG) and Redwood Trust (NYSE:RWT) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, institutional ownership, profitability, analyst recommendations, risk, valuation and dividends.

Dividends

DigitalBridge Group pays an annual dividend of $0.04 per share and has a dividend yield of 0.3%. Redwood Trust pays an annual dividend of $0.72 per share and has a dividend yield of 12.3%. DigitalBridge Group pays out -100.0% of its earnings in the form of a dividend. Redwood Trust pays out -112.5% 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. Redwood Trust has increased its dividend for 1 consecutive years. Redwood Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

92.7% of DigitalBridge Group shares are held by institutional investors. Comparatively, 74.3% of Redwood Trust shares are held by institutional investors. 3.6% of DigitalBridge Group shares are held by insiders. Comparatively, 2.7% of Redwood Trust shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares DigitalBridge Group and Redwood Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
DigitalBridge Group	$228.14 million	9.41	$70.52 million	($0.04)	-294.63
Redwood Trust	$945.16 million	0.80	$54.00 million	($0.64)	-9.13

DigitalBridge Group has higher earnings, but lower revenue than Redwood Trust. DigitalBridge Group is trading at a lower price-to-earnings ratio than Redwood Trust, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

DigitalBridge Group has a beta of 1.66, indicating that its stock price is 66% more volatile than the S&P 500. Comparatively, Redwood Trust has a beta of 1.43, indicating that its stock price is 43% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for DigitalBridge Group and Redwood Trust, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
DigitalBridge Group	0	1	5	2	3.13
Redwood Trust	0	2	4	0	2.67

DigitalBridge Group presently has a consensus target price of $16.14, suggesting a potential upside of 36.98%. Redwood Trust has a consensus target price of $6.88, suggesting a potential upside of 17.62%. Given DigitalBridge Group’s stronger consensus rating and higher probable upside, research analysts plainly believe DigitalBridge Group is more favorable than Redwood Trust.

Profitability

This table compares DigitalBridge Group and Redwood Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
DigitalBridge Group	18.57%	4.14%	1.97%
Redwood Trust	-6.93%	8.70%	0.49%

Summary

DigitalBridge Group beats Redwood Trust on 12 of the 18 factors compared between the two stocks.

About DigitalBridge Group

DigitalBridge is an infrastructure investment firm specializing in digital infrastructure assets. They provide services to institutional investors. They primarily invest in data centers, cell towers, fiber networks, small cells, and edge infrastructure. DigitalBridge Group, Inc. was founded in 1991 and is headquartered in Boca Raton, Florida with additional offices in Los Angles, California, and New York New York.

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.