Analyzing Piedmont Office Realty Trust (PDM) & Paramount Group (PGRE)

Piedmont Office Realty Trust (NYSE: PDM) and Paramount Group (NYSE:PGRE) are both mid-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, dividends, institutional ownership, analyst recommendations, profitability and earnings.

Dividends

Piedmont Office Realty Trust pays an annual dividend of $0.84 per share and has a dividend yield of 4.2%. Paramount Group pays an annual dividend of $0.38 per share and has a dividend yield of 2.4%. Piedmont Office Realty Trust pays out 62.7% of its earnings in the form of a dividend. Paramount Group pays out 102.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Piedmont Office Realty Trust has increased its dividend for 3 consecutive years. Piedmont Office Realty Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

84.1% of Piedmont Office Realty Trust shares are owned by institutional investors. Comparatively, 62.6% of Paramount Group shares are owned by institutional investors. 0.8% of Piedmont Office Realty Trust shares are owned by company insiders. Comparatively, 5.7% of Paramount Group 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 Piedmont Office Realty Trust and Paramount Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Piedmont Office Realty Trust 33.72% 4.06% 2.00%
Paramount Group 12.29% 1.76% 0.99%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Piedmont Office Realty Trust and Paramount Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Piedmont Office Realty Trust 0 1 1 0 2.50
Paramount Group 2 0 1 0 1.67

Piedmont Office Realty Trust currently has a consensus price target of $22.00, suggesting a potential upside of 8.96%. Paramount Group has a consensus price target of $15.00, suggesting a potential downside of 6.83%. Given Piedmont Office Realty Trust’s stronger consensus rating and higher probable upside, research analysts plainly believe Piedmont Office Realty Trust is more favorable than Paramount Group.

Volatility & Risk

Piedmont Office Realty Trust has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, Paramount Group has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500.

Valuation and Earnings

This table compares Piedmont Office Realty Trust and Paramount Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Piedmont Office Realty Trust $555.72 million 5.25 $99.73 million $1.34 15.07
Paramount Group $683.34 million 5.66 -$9.93 million $0.37 43.51

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

Summary

Piedmont Office Realty Trust beats Paramount Group on 11 of the 16 factors compared between the two stocks.

Piedmont Office Realty Trust Company Profile

Piedmont Office Realty Trust, Inc. is an integrated self-managed real estate investment trust (REIT). The Company’s business consists primarily of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of office real estate assets. As of December 31, 2016, the Company owned and operated 65 in-service office properties, one redevelopment asset, two development assets and one office building through an unconsolidated joint venture. Its properties are located in areas, including New York, Chicago, Atlanta, Dallas, Boston, Minneapolis and Orlando. Its tenant base includes industries, such as business services, depository institutions, educational services, real estate, legal services and insurance carriers. The Company conducts business primarily through Piedmont Operating Partnership, L.P. (Piedmont OP). It performs the management of its buildings through its subsidiaries, including Piedmont Government Services, LLC and Piedmont Office Management, LLC.

Paramount Group Company Profile

Paramount Group, Inc. is a fully-integrated real estate investment trust (REIT) focused on owning, operating, managing, acquiring and redeveloping Class A office properties in select central business district submarkets of New York City, Washington, District of Columbia (D.C.) and San Francisco. The Company conducts its business through, and substantially all its interests in properties and investments are held by, Paramount Group Operating Partnership LP (the Operating Partnership). The Company’s segments include New York, Washington, D.C. and San Francisco. As of December 31, 2016, the Company’s portfolio consisted of 13 Class A office properties aggregating approximately 10.8 million square feet that was 93.3% leased and 90.9% occupied. The Company also has an investment management business, where it serves as the general partner and property manager of certain private equity real estate funds for institutional investors and high-net-worth individuals.

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