Head-To-Head Analysis: Annaly Capital Management (NYSE:NLY) vs. Ellington Financial (NYSE:EFC)

Annaly Capital Management (NYSE:NLY) and Ellington Financial (NYSE:EFC) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, profitability, dividends, analyst recommendations, risk, valuation and institutional ownership.

Dividends

Annaly Capital Management pays an annual dividend of $2.80 per share and has a dividend yield of 12.8%. Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.5%. Annaly Capital Management pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ellington Financial pays out 94.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management has raised its dividend for 2 consecutive years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

51.6% of Annaly Capital Management shares are owned by institutional investors. Comparatively, 55.6% of Ellington Financial shares are owned by institutional investors. 0.2% of Annaly Capital Management shares are owned by company insiders. Comparatively, 3.2% of Ellington Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Annaly Capital Management and Ellington Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Annaly Capital Management	0	4	7	1	2.75
Ellington Financial	0	2	2	1	2.80

Annaly Capital Management currently has a consensus target price of $24.22, indicating a potential upside of 10.86%. Ellington Financial has a consensus target price of $14.08, indicating a potential upside of 3.82%. Given Annaly Capital Management’s higher possible upside, equities analysts clearly believe Annaly Capital Management is more favorable than Ellington Financial.

Risk and Volatility

Annaly Capital Management has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.94, meaning that its stock price is 6% less volatile than the S&P 500.

Valuation & Earnings

This table compares Annaly Capital Management and Ellington Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Annaly Capital Management	$2.40 billion	6.68	$2.03 billion	$2.96	7.38
Ellington Financial	$189.96 million	8.95	$146.87 million	$1.66	8.17

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

Profitability

This table compares Annaly Capital Management and Ellington Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Annaly Capital Management	34.33%	15.92%	1.68%
Ellington Financial	72.08%	15.81%	1.29%

Summary

Annaly Capital Management beats Ellington Financial on 10 of the 17 factors compared between the two stocks.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.

About Ellington Financial

Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Ellington Financial LLC was incorporated in 2007 and is headquartered in Old Greenwich, Connecticut.