CYS Investments (NYSE: CYS) and Hatteras Financial Corp. (NYSE:HTS) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, dividends, risk, profitability and earnings.

Volatility and Risk

CYS Investments has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, Hatteras Financial Corp. has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for CYS Investments and Hatteras Financial Corp., as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CYS Investments 1 3 0 0 1.75
Hatteras Financial Corp. 0 0 0 0 N/A

CYS Investments presently has a consensus price target of $8.00, indicating a potential downside of 8.26%. Given CYS Investments’ higher probable upside, equities research analysts clearly believe CYS Investments is more favorable than Hatteras Financial Corp..

Dividends

CYS Investments pays an annual dividend of $1.00 per share and has a dividend yield of 11.5%. Hatteras Financial Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 11.0%. CYS Investments pays out -400.0% of its earnings in the form of a dividend. Hatteras Financial Corp. pays out 580.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CYS Investments is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

62.7% of CYS Investments shares are owned by institutional investors. 1.0% of CYS Investments shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares CYS Investments and Hatteras Financial Corp.’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CYS Investments $6.14 million 215.52 -$37.94 million ($0.25) -34.88
Hatteras Financial Corp. N/A N/A N/A $0.31 52.55

Hatteras Financial Corp. has higher revenue, but lower earnings than CYS Investments. CYS Investments is trading at a lower price-to-earnings ratio than Hatteras Financial Corp., indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares CYS Investments and Hatteras Financial Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CYS Investments -5.86% 12.69% 1.39%
Hatteras Financial Corp. N/A -16.93% -1.89%

Summary

CYS Investments beats Hatteras Financial Corp. on 9 of the 11 factors compared between the two stocks.

About CYS Investments

CYS Investments, Inc. is a specialty finance company. The Company’s objective is to provide consistent returns to its investors through a combination of dividends and capital appreciation. It invests in agency residential mortgage-backed security (RMBS) collateralized by fixed rate single-family residential mortgage loans; adjustable-rate mortgages (ARMs), which have coupon rates that reset monthly, or hybrid ARMs, which have a coupon rate that is fixed for an initial period. In addition, it has investments in collateralized mortgage obligations issued by a government agency or government-sponsored entity (GSE) that are collateralized by Agency RMBS. Its investments consist of residential mortgage pass-through securities for which the principal and interest payments are guaranteed by a GSE, such as Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, or by the United States Government agency, such as Government National Mortgage Association.

About Hatteras Financial Corp.

Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.

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