Orchid Island Capital (NYSE: ORC) and Dynex Capital (NYSE:DX) are both small-cap financials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, profitability, earnings and risk.

Volatility & Risk

Orchid Island Capital has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500. Comparatively, Dynex Capital has a beta of 0.81, suggesting that its share price is 19% less volatile than the S&P 500.

Profitability

This table compares Orchid Island Capital and Dynex Capital’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%
Dynex Capital 86.86% 11.08% 1.27%

Valuation & Earnings

This table compares Orchid Island Capital and Dynex Capital’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Orchid Island Capital $87.12 million 4.66 $1.96 million ($0.57) -13.81
Dynex Capital $91.90 million 4.99 $43.09 million $1.44 4.85

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

Dividends

Orchid Island Capital pays an annual dividend of $1.68 per share and has a dividend yield of 21.3%. Dynex Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.3%. Orchid Island Capital pays out -294.7% of its earnings in the form of a dividend. Dynex Capital pays out 50.0% 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. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Orchid Island Capital and Dynex Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orchid Island Capital 0 1 0 0 2.00
Dynex Capital 0 1 1 0 2.50

Dynex Capital has a consensus target price of $7.38, indicating a potential upside of 5.66%. Given Dynex Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Dynex Capital is more favorable than Orchid Island Capital.

Institutional and Insider Ownership

27.1% of Orchid Island Capital shares are owned by institutional investors. Comparatively, 36.2% of Dynex Capital shares are owned by institutional investors. 0.9% of Orchid Island Capital shares are owned by company insiders. Comparatively, 7.1% of Dynex Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Dynex Capital beats Orchid Island Capital on 14 of the 16 factors compared between the two stocks.

Orchid Island Capital Company Profile

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.

Dynex Capital Company Profile

Dynex Capital, Inc. is an internally managed mortgage real estate investment trust, which invests in residential and commercial mortgage securities on a leveraged basis. The Company’s objective is to provide attractive risk-adjusted returns to its shareholders over the long term that is reflective of a leveraged fixed income portfolio with a focus on capital preservation. It seeks to provide returns to its shareholders through regular quarterly dividends and through capital appreciation. It invests in Agency and non-Agency mortgage-backed securities (MBS). MBS consists of residential MBS (RMBS), commercial MBS (CMBS) and CMBS interest-only securities. Agency MBS have a guaranty of principal payment by an agency of the United States Government or a government-sponsored entity (GSE), such as Fannie Mae and Freddie Mac.

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