Dynex Capital (NYSE: DX) and Apollo Residential Mortgage (NYSE:AMTG) are both financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitabiliy, earnings, valuation, analyst recommendations, dividends, risk and institutional ownership.

Profitability

This table compares Dynex Capital and Apollo Residential Mortgage’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dynex Capital 40.37% 7.25% 1.08%
Apollo Residential Mortgage 56.35% 10.11% 2.60%

Institutional and Insider Ownership

44.6% of Dynex Capital shares are held by institutional investors. 9.7% of Dynex Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Dynex Capital pays an annual dividend of $0.84 per share and has a dividend yield of 12.0%. Apollo Residential Mortgage pays an annual dividend of $1.92 per share and has a dividend yield of 14.1%. Dynex Capital pays out -1,399.8% of its earnings in the form of a dividend. Apollo Residential Mortgage pays out -206.4% 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. Dynex Capital has increased its dividend for 2 consecutive years.

Volatility and Risk

Dynex Capital has a beta of 0.83, indicating that its share price is 17% less volatile than the S&P 500. Comparatively, Apollo Residential Mortgage has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Dynex Capital and Apollo Residential Mortgage, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dynex Capital 0 3 0 0 2.00
Apollo Residential Mortgage 0 0 0 0 N/A

Dynex Capital presently has a consensus target price of $7.13, indicating a potential upside of 1.93%. Given Dynex Capital’s higher possible upside, equities analysts clearly believe Dynex Capital is more favorable than Apollo Residential Mortgage.

Earnings and Valuation

This table compares Dynex Capital and Apollo Residential Mortgage’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dynex Capital $96.98 million 3.55 -$2.95 million ($0.06) -116.48
Apollo Residential Mortgage N/A N/A N/A ($0.93) -14.67

Apollo Residential Mortgage has higher revenue, but lower earnings than Dynex Capital. Dynex Capital is trading at a lower price-to-earnings ratio than Apollo Residential Mortgage, indicating that it is currently the more affordable of the two stocks.

Summary

Dynex Capital beats Apollo Residential Mortgage on 8 of the 12 factors compared between the two stocks.

About Dynex Capital

Dynex Capital, Inc. is an internally managed mortgage real estate investment trust, which invests in residential and commercial mortgage securities on a leveraged basis. The Company’s objective is to provide attractive risk-adjusted returns to its shareholders over the long term that is reflective of a leveraged fixed income portfolio with a focus on capital preservation. It seeks to provide returns to its shareholders through regular quarterly dividends and through capital appreciation. It invests in Agency and non-Agency mortgage-backed securities (MBS). MBS consists of residential MBS (RMBS), commercial MBS (CMBS) and CMBS interest-only securities. Agency MBS have a guaranty of principal payment by an agency of the United States Government or a government-sponsored entity (GSE), such as Fannie Mae and Freddie Mac.

About Apollo Residential Mortgage

Apollo Residential Mortgage, Inc. is a holding company that conducts its business primarily through ARM Operating, LLC and other operating subsidiaries. The Company is primarily engaged in the business of investing in residential mortgage assets in the United States. The Company seeks to generate risk-adjusted returns from its assets to its stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. The Company’s portfolio consists of agency residential mortgage-backed securities (RMBS), non-Agency RMBS; securitized mortgage loans, and other mortgage and mortgage related investment securities and other mortgage related investments. The Company may invest in a range of other residential mortgage and mortgage-related assets. The Company is externally managed and advised by ARM Manager, LLC, an indirect subsidiary of Apollo Global Management, LLC.

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