Financial Analysis: MFA Financial (MFA) & Capstead Mortgage Corporation (CMO)
MFA Financial (NYSE: MFA) and Capstead Mortgage Corporation (NYSE:CMO) are both financials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, profitability, risk, earnings, valuation and institutional ownership.
Risk & Volatility
MFA Financial has a beta of 0.71, suggesting that its share price is 29% less volatile than the S&P 500. Comparatively, Capstead Mortgage Corporation has a beta of 0.38, suggesting that its share price is 62% less volatile than the S&P 500.
Institutional and Insider Ownership
80.1% of MFA Financial shares are owned by institutional investors. Comparatively, 72.6% of Capstead Mortgage Corporation shares are owned by institutional investors. 0.9% of MFA Financial shares are owned by insiders. Comparatively, 1.7% of Capstead Mortgage Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
This is a breakdown of recent ratings and recommmendations for MFA Financial and Capstead Mortgage Corporation, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Capstead Mortgage Corporation||0||2||0||0||2.00|
MFA Financial presently has a consensus price target of $8.50, indicating a potential downside of 2.41%. Capstead Mortgage Corporation has a consensus price target of $11.00, indicating a potential upside of 14.11%. Given Capstead Mortgage Corporation’s higher probable upside, analysts plainly believe Capstead Mortgage Corporation is more favorable than MFA Financial.
This table compares MFA Financial and Capstead Mortgage Corporation’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%|
Valuation and Earnings
This table compares MFA Financial and Capstead Mortgage Corporation’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|MFA Financial||$376.15 million||9.18||$309.13 million||$0.78||11.17|
|Capstead Mortgage Corporation||$88.27 million||10.50||$58.62 million||$0.61||15.80|
MFA Financial has higher revenue and earnings than Capstead Mortgage Corporation. MFA Financial 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.
MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 9.2%. Capstead Mortgage Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 7.9%. 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. Capstead Mortgage Corporation pays out 124.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capstead Mortgage Corporation has raised its dividend for 3 consecutive years. MFA Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.
MFA Financial beats Capstead Mortgage Corporation on 12 of the 17 factors compared between the two stocks.
MFA Financial Company Profile
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).
Capstead Mortgage Corporation Company Profile
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.
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