Western Asset Mortgage Capital Corporation (NYSE: WMC) and KKR Real Estate Finance Trust (NASDAQ:KREF) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, risk, institutional ownership, earnings, valuation and profitability.

Profitability

This table compares Western Asset Mortgage Capital Corporation and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital Corporation 27.34% 5.97% 0.83%
KKR Real Estate Finance Trust 64.81% 6.60% 0.87%

Earnings & Valuation

This table compares Western Asset Mortgage Capital Corporation and KKR Real Estate Finance Trust’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital Corporation $59.85 million 7.40 $34.37 million $0.82 12.88
KKR Real Estate Finance Trust $59.48 million 19.26 N/A N/A N/A

Western Asset Mortgage Capital Corporation has higher revenue and earnings than KKR Real Estate Finance Trust.

Insider and Institutional Ownership

40.2% of Western Asset Mortgage Capital Corporation shares are owned by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are owned 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

Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 11.7%. KKR Real Estate Finance Trust does not pay a dividend. Western Asset Mortgage Capital Corporation pays out 151.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of recent recommendations for Western Asset Mortgage Capital Corporation and KKR Real Estate Finance Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital Corporation 0 2 0 0 2.00
KKR Real Estate Finance Trust 0 3 0 0 2.00

Western Asset Mortgage Capital Corporation currently has a consensus target price of $10.00, suggesting a potential downside of 5.30%. KKR Real Estate Finance Trust has a consensus target price of $22.75, suggesting a potential upside of 6.66%. Given KKR Real Estate Finance Trust’s higher probable upside, analysts plainly believe KKR Real Estate Finance Trust is more favorable than Western Asset Mortgage Capital Corporation.

Summary

KKR Real Estate Finance Trust beats Western Asset Mortgage Capital Corporation on 7 of the 11 factors compared between the two stocks.

About Western Asset Mortgage Capital Corporation

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc is a real estate finance company that focuses primarily on originating and acquiring senior mortgage loans secured by commercial real estate assets (CRE). KKR manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. The Company’s investment strategy is to originate or acquire senior mortgage loans collateralized by institutional-quality CRE assets. Its target assets also include mezzanine loans, preferred equity and other debt-oriented instruments. The Company’s investment objective is capital preservation and generating attractive risk-adjusted returns for its stockholders over the long term, primarily through dividends.

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