American Capital Mortgage Investment Corp. (NASDAQ: MTGE) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, dividends, earnings and valuation.

Dividends

American Capital Mortgage Investment Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 9.4%. Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 9.7%. 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. Annaly Capital Management pays out 41.5% of its earnings in the form of a dividend. Annaly Capital Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

73.9% of American Capital Mortgage Investment Corp. shares are owned by institutional investors. Comparatively, 51.9% of Annaly Capital Management shares are owned by institutional investors. 1.1% of American Capital Mortgage Investment Corp. shares are owned by company insiders. Comparatively, 0.4% of Annaly Capital Management shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares American Capital Mortgage Investment Corp. and Annaly Capital Management’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 5.52 $101.67 million $2.22 8.63
Annaly Capital Management $3.30 billion 4.07 $3.14 billion $2.89 4.27

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

Analyst Ratings

This is a breakdown of recent ratings and target prices for American Capital Mortgage Investment Corp. and Annaly Capital Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Mortgage Investment Corp. 0 1 3 0 2.75
Annaly Capital Management 1 3 2 0 2.17

American Capital Mortgage Investment Corp. presently has a consensus price target of $20.00, suggesting a potential upside of 4.44%. Annaly Capital Management has a consensus price target of $11.25, suggesting a potential downside of 8.91%. 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 Annaly Capital Management.

Profitability

This table compares American Capital Mortgage Investment Corp. and Annaly Capital Management’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%
Annaly Capital Management 121.84% 11.33% 1.52%

Risk and Volatility

American Capital Mortgage Investment Corp. has a beta of 0.48, indicating that its share price is 52% less volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 0.28, indicating that its share price is 72% less volatile than the S&P 500.

American Capital Mortgage Investment Corp. Company Profile

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.

Annaly Capital Management Company Profile

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

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