Financial Review: Innovative Industrial Properties (NYSE:IIPR) vs. Sunstone Hotel Investors (NYSE:SHO)

Innovative Industrial Properties (NYSE:IIPR) and Sunstone Hotel Investors (NYSE:SHO) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, analyst recommendations, dividends, valuation, risk, institutional ownership and earnings.

Analyst Recommendations

This is a summary of current recommendations and price targets for Innovative Industrial Properties and Sunstone Hotel Investors, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Innovative Industrial Properties	1	4	0	0	1.80
Sunstone Hotel Investors	0	5	2	1	2.50

Innovative Industrial Properties currently has a consensus price target of $45.00, indicating a potential downside of 24.13%. Sunstone Hotel Investors has a consensus price target of $10.67, indicating a potential downside of 10.02%. Given Sunstone Hotel Investors’ stronger consensus rating and higher probable upside, analysts plainly believe Sunstone Hotel Investors is more favorable than Innovative Industrial Properties.

Institutional & Insider Ownership

70.6% of Innovative Industrial Properties shares are held by institutional investors. Comparatively, 99.4% of Sunstone Hotel Investors shares are held by institutional investors. 2.0% of Innovative Industrial Properties shares are held by insiders. Comparatively, 1.4% of Sunstone Hotel Investors shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

Innovative Industrial Properties has a beta of 1.42, indicating that its share price is 42% more volatile than the S&P 500. Comparatively, Sunstone Hotel Investors has a beta of 0.98, indicating that its share price is 2% less volatile than the S&P 500.

Dividends

Innovative Industrial Properties pays an annual dividend of $7.60 per share and has a dividend yield of 12.8%. Sunstone Hotel Investors pays an annual dividend of $0.36 per share and has a dividend yield of 3.0%. Innovative Industrial Properties pays out 194.4% 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 pays out 327.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Innovative Industrial Properties has raised its dividend for 4 consecutive years and Sunstone Hotel Investors has raised its dividend for 2 consecutive years. Innovative Industrial Properties is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Innovative Industrial Properties	45.58%	6.62%	5.10%
Sunstone Hotel Investors	3.84%	2.27%	1.25%

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Innovative Industrial Properties	$265.95 million	6.42	$118.25 million	$3.91	15.17
Sunstone Hotel Investors	$960.13 million	2.30	$24.57 million	$0.11	107.77

Innovative Industrial Properties has higher earnings, but lower revenue than Sunstone Hotel Investors. Innovative Industrial 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.

Summary

Innovative Industrial Properties beats Sunstone Hotel Investors on 11 of the 18 factors compared between the two stocks.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017.

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.