American Capital Mortgage Investment Corp. (NASDAQ: MTGE) and MFA Financial (NYSE:MFA) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, earnings, dividends, institutional ownership, valuation, profitability and analyst recommendations.

Dividends

American Capital Mortgage Investment Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 9.5%. MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 9.2%. American Capital Mortgage Investment Corp. pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MFA Financial pays out 102.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Capital Mortgage Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares American Capital Mortgage Investment Corp. and MFA Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Capital Mortgage Investment Corp. $158.84 million 5.43 $101.67 million $2.22 8.49
MFA Financial $376.15 million 9.14 $309.13 million $0.78 11.12

MFA Financial has higher revenue and earnings than American Capital Mortgage Investment Corp.. American Capital Mortgage Investment Corp. is trading at a lower price-to-earnings ratio than MFA Financial, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

American Capital Mortgage Investment Corp. has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500. Comparatively, MFA Financial has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for American Capital Mortgage Investment Corp. and MFA Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Mortgage Investment Corp. 0 2 3 0 2.60
MFA Financial 0 3 2 0 2.40

American Capital Mortgage Investment Corp. currently has a consensus price target of $19.17, indicating a potential upside of 1.68%. MFA Financial has a consensus price target of $8.25, indicating a potential downside of 4.84%. Given American Capital Mortgage Investment Corp.’s stronger consensus rating and higher probable upside, equities research analysts plainly believe American Capital Mortgage Investment Corp. is more favorable than MFA Financial.

Profitability

This table compares American Capital Mortgage Investment Corp. and MFA Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Capital Mortgage Investment Corp. 104.38% 10.40% 1.77%
MFA Financial 61.94% 10.12% 2.58%

Institutional and Insider Ownership

73.9% of American Capital Mortgage Investment Corp. shares are owned by institutional investors. Comparatively, 80.1% of MFA Financial shares are owned by institutional investors. 1.1% of American Capital Mortgage Investment Corp. shares are owned by insiders. Comparatively, 0.9% of MFA Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

American Capital Mortgage Investment Corp. beats MFA Financial on 9 of the 16 factors compared between the two stocks.

About American Capital Mortgage Investment Corp.

MTGE Investment Corp., formerly American Capital Mortgage Investment Corp., is a real estate investment trust. The Company invests in, finances and manages a leveraged portfolio of real estate-related investments, which include agency residential mortgage-backed securities (RMBS), non-agency securities, other mortgage-related investments and other real estate investments. Agency RMBS includes residential mortgage pass-through certificates and collateralized mortgage obligations (CMOs) structured from residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (GSE), or by a United States Government agency, such as Government National Mortgage Association (Ginnie Mae). Non-agency securities include securities backed by residential mortgages that are not guaranteed by a GSE or the United States Government agency, and credit risk transfer securities (CRT). The Company’s manager is MTGE Management, LLC.

About MFA Financial

MFA Financial, Inc. is engaged in the real estate finance business. The Company’s subsidiaries invest in residential mortgage assets, including Non-Agency mortgage-backed securities (MBS), Agency MBS, residential whole loans and credit risk transfer (CRT) securities. The Company’s Non-Agency MBS portfolio primarily consists of Legacy Non-Agency MBS and 3 Year Step-up securities. In addition to Non-Agency MBS investments, the Company invests in re-performing and non-performing residential whole loans through its interests in certain consolidated trusts. The mortgages collateralizing its Agency MBS portfolio are predominantly Hybrids, 15-year fixed-rate mortgages and adjustable-rate mortgages (ARMs).

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