Contrasting Orchid Island Capital (ORC) and New Residential Investment (NRZ)

Orchid Island Capital (NYSE: ORC) and New Residential Investment (NYSE:NRZ) are both financials companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.

Dividends

Orchid Island Capital pays an annual dividend of $1.68 per share and has a dividend yield of 18.4%. New Residential Investment pays an annual dividend of $2.00 per share and has a dividend yield of 11.3%. Orchid Island Capital pays out -294.7% of its earnings in the form of a dividend. New Residential Investment pays out 64.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. New Residential Investment has raised its dividend for 3 consecutive years. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Orchid Island Capital has a beta of 0.49, meaning that its stock price is 51% less volatile than the S&P 500. Comparatively, New Residential Investment has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500.

Earnings & Valuation

This table compares Orchid Island Capital and New Residential Investment’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Orchid Island Capital $87.12 million 5.39 $1.96 million ($0.57) -15.98
New Residential Investment $1.08 billion 5.06 $504.45 million $3.09 5.73

New Residential Investment has higher revenue and earnings than Orchid Island Capital. Orchid Island Capital is trading at a lower price-to-earnings ratio than New Residential Investment, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

27.1% of Orchid Island Capital shares are held by institutional investors. Comparatively, 48.5% of New Residential Investment shares are held by institutional investors. 0.9% of Orchid Island Capital shares are held by company insiders. Comparatively, 4.0% of New Residential Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Orchid Island Capital and New Residential Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Orchid Island Capital N/A -1.10% -0.11%
New Residential Investment 60.06% 19.38% 3.99%

Analyst Ratings

This is a summary of recent recommendations and price targets for Orchid Island Capital and New Residential Investment, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orchid Island Capital 0 1 0 0 2.00
New Residential Investment 0 1 6 0 2.86

New Residential Investment has a consensus price target of $18.33, suggesting a potential upside of 3.52%. Given New Residential Investment’s stronger consensus rating and higher possible upside, analysts plainly believe New Residential Investment is more favorable than Orchid Island Capital.

Summary

New Residential Investment beats Orchid Island Capital on 14 of the 17 factors compared between the two stocks.

About Orchid Island Capital

Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities (RMBS). The Company’s business objective is to provide attractive risk-adjusted total returns to its investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. Its portfolio consists of two categories of Agency RMBS: pass-through Agency RMBS and structured Agency RMBS. It invests in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. The mortgage loans underlying pass-through certificates are classified into three categories, including fixed-rate mortgages, adjustable-rate mortgages (ARMs) and Hybrid ARMs. It invests in structured Agency RMBS, which include collateralized mortgage obligations, interest only securities, inverse interest only securities and principal only securities.

About New Residential Investment

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

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