Chimera Investment Corporation (NYSE: CIM) and Capstead Mortgage Corporation (NYSE:CMO) are both mortgage reits companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, dividends, risk, profitability, analyst recommendations and institutional ownership.

Analyst Ratings

This is a breakdown of current ratings and price targets for Chimera Investment Corporation and Capstead Mortgage Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Chimera Investment Corporation 0 4 0 0 2.00
Capstead Mortgage Corporation 0 2 0 0 2.00

Chimera Investment Corporation presently has a consensus target price of $18.83, indicating a potential upside of 2.24%. Capstead Mortgage Corporation has a consensus target price of $11.00, indicating a potential upside of 23.87%. Given Capstead Mortgage Corporation’s higher probable upside, analysts plainly believe Capstead Mortgage Corporation is more favorable than Chimera Investment Corporation.

Profitability

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

Net Margins Return on Equity Return on Assets
Chimera Investment Corporation 58.21% 13.29% 2.33%
Capstead Mortgage Corporation 34.00% 7.16% 0.54%

Insider and Institutional Ownership

50.8% of Chimera Investment Corporation shares are held by institutional investors. Comparatively, 70.6% of Capstead Mortgage Corporation shares are held by institutional investors. 0.7% of Chimera Investment Corporation shares are held by company insiders. Comparatively, 1.7% of Capstead Mortgage Corporation shares are held by company 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.

Dividends

Chimera Investment Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 10.9%. Capstead Mortgage Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 8.6%. Chimera Investment Corporation pays out 61.5% of its earnings in the form of a dividend. Capstead Mortgage Corporation pays out 126.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chimera Investment Corporation has increased its dividend for 3 consecutive years and Capstead Mortgage Corporation has increased its dividend for 2 consecutive years. Chimera Investment Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Chimera Investment Corporation and Capstead Mortgage Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Chimera Investment Corporation $934.07 million 3.70 $551.94 million $3.25 5.67
Capstead Mortgage Corporation $213.33 million 4.00 $82.87 million $0.60 14.80

Chimera Investment Corporation has higher revenue and earnings than Capstead Mortgage Corporation. Chimera Investment Corporation 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.

Risk and Volatility

Chimera Investment Corporation has a beta of 0.92, indicating that its stock price is 8% less 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

Chimera Investment Corporation beats Capstead Mortgage Corporation on 10 of the 15 factors compared between the two stocks.

About Chimera Investment Corporation

Chimera Investment Corporation is a real estate investment trust (REIT). The company is engaged in the business of investing in a portfolio of mortgage assets, including agency residential mortgage-backed security (RMBS), non-agency RMBS, agency commercial mortgage-backed securities (CMBS), residential mortgage loans and real estate related securities. The Company’s objective is to provide risk-adjusted returns to its investors over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses to achieve this objective by investing in an investment portfolio of RMBS, agency CMBS, residential mortgage loans, commercial mortgage loans, real estate-related securities and various other asset classes. The MBS and real estate-related securities the Company purchases include investment-grade and non-investment grade classes, including the BB-rated, B-rated and non-rated classes. It also invests in investment grade and non-investment grade RMBS.

About Capstead Mortgage Corporation

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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