Ellington Residential Mortgage REIT (NYSE: EARN) and New Residential Investment Corp. (NYSE:NRZ) are both finance 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.

Valuation & Earnings

This table compares Ellington Residential Mortgage REIT and New Residential Investment Corp.’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ellington Residential Mortgage REIT $32.43 million 4.14 $14.15 million $1.55 9.48
New Residential Investment Corp. $876.30 million 5.61 $623.88 million $2.03 7.88

New Residential Investment Corp. has higher revenue and earnings than Ellington Residential Mortgage REIT. New Residential Investment Corp. is trading at a lower price-to-earnings ratio than Ellington Residential Mortgage REIT, indicating that it is currently the more affordable of the two stocks.

Dividends

Ellington Residential Mortgage REIT pays an annual dividend of $1.60 per share and has a dividend yield of 10.9%. New Residential Investment Corp. pays an annual dividend of $2.00 per share and has a dividend yield of 12.5%. Ellington Residential Mortgage REIT pays out 103.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Residential Investment Corp. pays out 98.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ellington Residential Mortgage REIT has increased its dividend for 3 consecutive years. New Residential Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Ellington Residential Mortgage REIT has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500. Comparatively, New Residential Investment Corp. has a beta of 1, indicating that its share price has a similar volatility profile to the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Ellington Residential Mortgage REIT and New Residential Investment Corp., as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ellington Residential Mortgage REIT 0 2 0 0 2.00
New Residential Investment Corp. 0 2 6 0 2.75

Ellington Residential Mortgage REIT presently has a consensus target price of $13.50, indicating a potential downside of 8.16%. New Residential Investment Corp. has a consensus target price of $16.43, indicating a potential upside of 2.68%. Given New Residential Investment Corp.’s stronger consensus rating and higher possible upside, analysts clearly believe New Residential Investment Corp. is more favorable than Ellington Residential Mortgage REIT.

Institutional and Insider Ownership

48.3% of Ellington Residential Mortgage REIT shares are held by institutional investors. Comparatively, 54.8% of New Residential Investment Corp. shares are held by institutional investors. 2.7% of Ellington Residential Mortgage REIT shares are held by insiders. Comparatively, 4.0% of New Residential Investment Corp. 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.

Profitability

This table compares Ellington Residential Mortgage REIT and New Residential Investment Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ellington Residential Mortgage REIT 55.08% 12.68% 1.24%
New Residential Investment Corp. 43.60% 15.48% 2.99%

Summary

New Residential Investment Corp. beats Ellington Residential Mortgage REIT on 14 of the 17 factors compared between the two stocks.

Ellington Residential Mortgage REIT Company Profile

Ellington Residential Mortgage REIT is a real estate investment trust. The Company conducts its business through its subsidiaries, EARN OP GP LLC and Ellington Residential Mortgage LP (the Operating Partnership). It specializes in acquiring, investing in and managing residential mortgage- and real estate-related assets. It constructs and managing a portfolio consisting of residential mortgage-backed securities (RMBS) for which the principal and interest payments are guaranteed by the United States Government agency or the United States Government-sponsored entity (Agency RMBS) and, to a lesser extent, RMBS backed by prime jumbo, Alternative A-paper manufactured housing, and subprime residential mortgage loans (non-Agency RMBS). Its Agency RMBS include residential mortgage pass-through certificates, collateralized mortgage obligations (CMOs) and to-be-announced mortgage pass-through certificates (TBAs). Its non-agency RMBS include investment grade and non-investment grade classes.

New Residential Investment Corp. Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

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