Capstead Mortgage Corporation (NYSE: CMO) and Dynex Capital (NYSE:DX) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, dividends, profitability, valuation, analyst recommendations and institutional ownership.

Dividends

Capstead Mortgage Corporation pays an annual dividend of $0.84 per share and has a dividend yield of 8.7%. Dynex Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. Capstead Mortgage Corporation pays out 137.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Dynex Capital pays out 46.8% of its earnings in the form of a dividend. Dynex Capital has raised its dividend for 3 consecutive years. Dynex Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current recommendations for Capstead Mortgage Corporation and Dynex Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstead Mortgage Corporation 0 2 0 0 2.00
Dynex Capital 0 3 0 0 2.00

Capstead Mortgage Corporation presently has a consensus price target of $11.00, indicating a potential upside of 13.64%. Dynex Capital has a consensus price target of $7.13, indicating a potential downside of 0.49%. Given Capstead Mortgage Corporation’s higher possible upside, equities analysts plainly believe Capstead Mortgage Corporation is more favorable than Dynex Capital.

Risk and Volatility

Capstead Mortgage Corporation has a beta of 0.36, indicating that its share price is 64% less volatile than the S&P 500. Comparatively, Dynex Capital has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500.

Insider & Institutional Ownership

71.2% of Capstead Mortgage Corporation shares are owned by institutional investors. Comparatively, 44.2% of Dynex Capital shares are owned by institutional investors. 1.7% of Capstead Mortgage Corporation shares are owned by insiders. Comparatively, 7.1% of Dynex Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Capstead Mortgage Corporation 35.05% 7.31% 0.56%
Dynex Capital -29.90% -10.86% -0.93%

Earnings & Valuation

This table compares Capstead Mortgage Corporation and Dynex Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capstead Mortgage Corporation $88.27 million 10.54 $58.62 million $0.61 15.87
Dynex Capital $105.39 million 3.34 $75.82 million $1.54 4.65

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

Summary

Dynex Capital beats Capstead Mortgage Corporation on 8 of the 15 factors compared between the two stocks.

About Capstead Mortgage Corporation

Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.

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.

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