Orchid Island Capital (NYSE:ORC – Get Free Report) and NexPoint Real Estate Finance (NYSE:NREF – Get Free Report) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, analyst recommendations, valuation, earnings, risk, institutional ownership and profitability.
Volatility and Risk
Orchid Island Capital has a beta of 1.54, suggesting that its share price is 54% more volatile than the S&P 500. Comparatively, NexPoint Real Estate Finance has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500.
Institutional and Insider Ownership
32.7% of Orchid Island Capital shares are owned by institutional investors. Comparatively, 67.8% of NexPoint Real Estate Finance shares are owned by institutional investors. 0.3% of Orchid Island Capital shares are owned by insiders. Comparatively, 55.7% of NexPoint Real Estate Finance shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Orchid Island Capital | 1 | 1 | 0 | 0 | 1.50 |
| NexPoint Real Estate Finance | 0 | 4 | 0 | 0 | 2.00 |
Orchid Island Capital currently has a consensus target price of $7.50, indicating a potential upside of 8.46%. NexPoint Real Estate Finance has a consensus target price of $15.50, indicating a potential downside of 1.37%. Given Orchid Island Capital’s higher possible upside, analysts clearly believe Orchid Island Capital is more favorable than NexPoint Real Estate Finance.
Profitability
This table compares Orchid Island Capital and NexPoint Real Estate Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Orchid Island Capital | N/A | 10.24% | 1.19% |
| NexPoint Real Estate Finance | 117.74% | 13.14% | 0.93% |
Dividends
Orchid Island Capital pays an annual dividend of $1.20 per share and has a dividend yield of 17.4%. NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 12.7%. Orchid Island Capital pays out 160.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Real Estate Finance pays out 76.3% 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.
Earnings & Valuation
This table compares Orchid Island Capital and NexPoint Real Estate Finance”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Orchid Island Capital | $414.00 million | 3.35 | $159.03 million | $0.75 | 9.22 |
| NexPoint Real Estate Finance | $169.42 million | 1.75 | $105.10 million | $2.62 | 6.00 |
Orchid Island Capital has higher revenue and earnings than NexPoint Real Estate Finance. NexPoint Real Estate Finance 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 NexPoint Real Estate Finance on 9 of the 16 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 NexPoint Real Estate Finance
NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.
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