New Residential Investment Corp. (NYSE: NRZ) and Capstead Mortgage Corporation (NYSE:CMO) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, valuation, dividends, risk and profitability.

Insider and Institutional Ownership

48.0% of New Residential Investment Corp. shares are owned by institutional investors. Comparatively, 70.6% of Capstead Mortgage Corporation shares are owned by institutional investors. 0.5% of New Residential Investment Corp. shares are owned by insiders. Comparatively, 1.7% of Capstead Mortgage Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current recommendations for New Residential Investment Corp. and Capstead Mortgage Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Residential Investment Corp. 0 1 6 0 2.86
Capstead Mortgage Corporation 0 2 0 0 2.00

New Residential Investment Corp. currently has a consensus price target of $18.15, suggesting a potential upside of 4.13%. Capstead Mortgage Corporation has a consensus price target of $11.00, suggesting a potential upside of 24.72%. Given Capstead Mortgage Corporation’s higher probable upside, analysts clearly believe Capstead Mortgage Corporation is more favorable than New Residential Investment Corp..

Profitability

This table compares New Residential Investment Corp. and Capstead Mortgage Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Residential Investment Corp. 60.06% 19.38% 3.99%
Capstead Mortgage Corporation 34.00% 7.16% 0.54%

Valuation and Earnings

This table compares New Residential Investment Corp. and Capstead Mortgage Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
New Residential Investment Corp. $1.08 billion 4.98 $504.45 million $3.09 5.64
Capstead Mortgage Corporation $213.33 million 3.97 $82.87 million $0.61 14.46

New Residential Investment Corp. has higher revenue and earnings than Capstead Mortgage Corporation. New Residential Investment Corp. is trading at a lower price-to-earnings ratio than Capstead Mortgage Corporation, indicating that it is currently the more affordable of the two stocks.

Dividends

New Residential Investment Corp. pays an annual dividend of $2.00 per share and has a dividend yield of 11.5%. Capstead Mortgage Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 8.6%. New Residential Investment Corp. pays out 64.7% of its earnings in the form of a dividend. Capstead Mortgage Corporation pays out 124.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Residential Investment Corp. has increased its dividend for 3 consecutive years and Capstead Mortgage Corporation has increased its dividend for 3 consecutive years. New Residential Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

New Residential Investment Corp. has a beta of 1.04, indicating that its stock price is 4% more volatile than the S&P 500. Comparatively, Capstead Mortgage Corporation has a beta of 0.3, indicating that its stock price is 70% less volatile than the S&P 500.

Summary

New Residential Investment Corp. beats Capstead Mortgage Corporation on 12 of the 16 factors compared between the two stocks.

New Residential Investment Corp. Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

Capstead Mortgage Corporation Company Profile

Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.

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