Critical Comparison: Orchid Island Capital (NYSE:ORC) and Angel Oak Mortgage REIT (NYSE:AOMR)

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

Dividends

Orchid Island Capital pays an annual dividend of $1.44 per share and has a dividend yield of 19.7%. Angel Oak Mortgage REIT pays an annual dividend of $1.28 per share and has a dividend yield of 14.7%. Orchid Island Capital pays out 293.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Angel Oak Mortgage REIT pays out 180.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital has raised its dividend for 1 consecutive years. Orchid Island Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Orchid Island Capital has a beta of 1.66, meaning that its stock price is 66% more volatile than the S&P 500. Comparatively, Angel Oak Mortgage REIT has a beta of 1.36, meaning that its stock price is 36% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Orchid Island Capital and Angel Oak Mortgage REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Orchid Island Capital	1	3	0	0	1.75
Angel Oak Mortgage REIT	0	3	4	0	2.57

Orchid Island Capital currently has a consensus target price of $7.50, indicating a potential upside of 2.39%. Angel Oak Mortgage REIT has a consensus target price of $11.45, indicating a potential upside of 31.84%. Given Angel Oak Mortgage REIT’s stronger consensus rating and higher probable upside, analysts clearly believe Angel Oak Mortgage REIT is more favorable than Orchid Island Capital.

Profitability

This table compares Orchid Island Capital and Angel Oak Mortgage REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Orchid Island Capital	N/A	6.69%	0.79%
Angel Oak Mortgage REIT	12.93%	6.42%	0.63%

Insider and Institutional Ownership

32.7% of Orchid Island Capital shares are held by institutional investors. Comparatively, 80.2% of Angel Oak Mortgage REIT shares are held by institutional investors. 0.4% of Orchid Island Capital shares are held by company insiders. Comparatively, 2.9% of Angel Oak Mortgage REIT shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Orchid Island Capital and Angel Oak Mortgage REIT”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Orchid Island Capital	$241.58 million	5.43	$37.66 million	$0.49	14.95
Angel Oak Mortgage REIT	$110.43 million	1.96	$28.75 million	$0.71	12.23

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

Summary

Orchid Island Capital beats Angel Oak Mortgage REIT on 9 of the 17 factors compared between the two stocks.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.

About Angel Oak Mortgage REIT

Angel Oak Mortgage REIT, Inc., a real estate finance company, focuses on acquiring and investing in first lien non- qualified mortgage loans and other mortgage-related assets in the United States mortgage market. It offers investment securities; residential mortgage loans; and commercial mortgage loans. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2018 and is headquartered in Atlanta, Georgia.