Apollo Residential Mortgage (NYSE: AMTG) and Western Asset Mortgage Capital Corporation (NYSE:WMC) are both small-cap mortgage reits companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, profitability, valuation and risk.

Volatility & Risk

Apollo Residential Mortgage has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, Western Asset Mortgage Capital Corporation has a beta of 0.73, suggesting that its stock price is 27% less volatile than the S&P 500.

Profitability

This table compares Apollo Residential Mortgage and Western Asset Mortgage Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apollo Residential Mortgage 56.35% 10.11% 2.60%
Western Asset Mortgage Capital Corporation 18.57% 1.81% 0.23%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Apollo Residential Mortgage and Western Asset Mortgage Capital Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Residential Mortgage 0 0 0 0 N/A
Western Asset Mortgage Capital Corporation 0 2 0 0 2.00

Western Asset Mortgage Capital Corporation has a consensus price target of $10.00, suggesting a potential upside of 3.73%. Given Western Asset Mortgage Capital Corporation’s higher probable upside, analysts plainly believe Western Asset Mortgage Capital Corporation is more favorable than Apollo Residential Mortgage.

Earnings and Valuation

This table compares Apollo Residential Mortgage and Western Asset Mortgage Capital Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Apollo Residential Mortgage N/A N/A N/A ($0.94) -14.51
Western Asset Mortgage Capital Corporation $91.33 million 4.42 -$25.01 million $0.60 16.07

Apollo Residential Mortgage has higher revenue, but lower earnings than Western Asset Mortgage Capital Corporation. Apollo Residential Mortgage is trading at a lower price-to-earnings ratio than Western Asset Mortgage Capital Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

40.7% of Western Asset Mortgage Capital Corporation shares are held by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Apollo Residential Mortgage pays an annual dividend of $1.92 per share and has a dividend yield of 14.1%. Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 12.9%. Apollo Residential Mortgage pays out -204.3% of its earnings in the form of a dividend. Western Asset Mortgage Capital Corporation pays out 206.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Residential Mortgage has increased its dividend for 2 consecutive years. Apollo Residential Mortgage is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

About Apollo Residential Mortgage

Apollo Residential Mortgage, Inc. is a holding company that conducts its business primarily through ARM Operating, LLC and other operating subsidiaries. The Company is primarily engaged in the business of investing in residential mortgage assets in the United States. The Company seeks to generate risk-adjusted returns from its assets to its stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. The Company’s portfolio consists of agency residential mortgage-backed securities (RMBS), non-Agency RMBS; securitized mortgage loans, and other mortgage and mortgage related investment securities and other mortgage related investments. The Company may invest in a range of other residential mortgage and mortgage-related assets. The Company is externally managed and advised by ARM Manager, LLC, an indirect subsidiary of Apollo Global Management, LLC.

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.

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