Critical Analysis: AGNC Investment (AGNC) versus KKR Real Estate Finance Trust (KREF)

AGNC Investment (NASDAQ: AGNC) and KKR Real Estate Finance Trust (NYSE:KREF) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, earnings, risk and dividends.

Insider & Institutional Ownership

65.6% of AGNC Investment shares are owned by institutional investors. Comparatively, 64.8% of KKR Real Estate Finance Trust shares are owned by institutional investors. 0.5% of AGNC Investment shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and recommmendations for AGNC Investment and KKR Real Estate Finance Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AGNC Investment 0 4 2 0 2.33
KKR Real Estate Finance Trust 1 2 1 0 2.00

AGNC Investment currently has a consensus price target of $19.75, indicating a potential upside of 4.66%. KKR Real Estate Finance Trust has a consensus price target of $22.50, indicating a potential upside of 15.98%. Given KKR Real Estate Finance Trust’s higher probable upside, analysts clearly believe KKR Real Estate Finance Trust is more favorable than AGNC Investment.

Dividends

AGNC Investment pays an annual dividend of $2.16 per share and has a dividend yield of 11.4%. KKR Real Estate Finance Trust pays an annual dividend of $1.48 per share and has a dividend yield of 7.6%. AGNC Investment pays out 110.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares AGNC Investment and KKR Real Estate Finance Trust’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AGNC Investment $769.00 million 9.60 $771.00 million $1.96 9.63
KKR Real Estate Finance Trust $41.19 million 25.29 $31.15 million N/A N/A

AGNC Investment has higher revenue and earnings than KKR Real Estate Finance Trust.

Profitability

This table compares AGNC Investment and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AGNC Investment 86.72% 12.17% 1.54%
KKR Real Estate Finance Trust 77.41% 6.08% 0.75%

Summary

AGNC Investment beats KKR Real Estate Finance Trust on 10 of the 13 factors compared between the two stocks.

About AGNC Investment

AGNC Investment Corp., formerly American Capital Agency Corp., is a real estate investment trust. The Company invests in agency residential mortgage-backed securities on a leveraged basis. Its investments consist of residential mortgage pass-through securities and collateralized mortgage obligations (CMOs) for which the principal and interest payments are guaranteed by a government-sponsored enterprise, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by the United States Government agency, such as the Government National Mortgage Association (Ginnie Mae) (collectively, GSEs). Its agency securities include agency residential mortgage-backed securities (Agency RMBS) and to-be-announced forward contracts (TBAs). Its Non-Agency Securities include credit risk transfer securities (CRT), non-agency residential mortgage-backed securities (Non-Agency RMBS) and commercial mortgage-backed securities (CMBS).

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc is a real estate finance company that focuses primarily on originating and acquiring senior mortgage loans secured by commercial real estate assets (CRE). KKR manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. The Company’s investment strategy is to originate or acquire senior mortgage loans collateralized by institutional-quality CRE assets. Its target assets also include mezzanine loans, preferred equity and other debt-oriented instruments. The Company’s investment objective is capital preservation and generating attractive risk-adjusted returns for its stockholders over the long term, primarily through dividends.

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