American Capital Mortgage Investment Corp. (NASDAQ: MTGE) and Starwood Property Trust (NYSE:STWD) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, profitability and dividends.

Risk and Volatility

American Capital Mortgage Investment Corp. has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500.

Dividends

American Capital Mortgage Investment Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 9.3%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 8.6%. American Capital Mortgage Investment Corp. pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Starwood Property Trust pays out 109.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Capital Mortgage Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for American Capital Mortgage Investment Corp. and Starwood Property Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Mortgage Investment Corp. 0 2 3 0 2.60
Starwood Property Trust 0 1 2 0 2.67

American Capital Mortgage Investment Corp. presently has a consensus target price of $19.17, indicating a potential downside of 0.69%. Starwood Property Trust has a consensus target price of $24.50, indicating a potential upside of 10.06%. Given Starwood Property Trust’s stronger consensus rating and higher possible upside, analysts clearly believe Starwood Property Trust is more favorable than American Capital Mortgage Investment Corp..

Insider & Institutional Ownership

73.9% of American Capital Mortgage Investment Corp. shares are owned by institutional investors. Comparatively, 68.6% of Starwood Property Trust shares are owned by institutional investors. 1.1% of American Capital Mortgage Investment Corp. shares are owned by insiders. Comparatively, 2.4% of Starwood Property Trust 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.

Profitability

This table compares American Capital Mortgage Investment Corp. and Starwood Property Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Capital Mortgage Investment Corp. 104.38% 10.40% 1.77%
Starwood Property Trust 55.89% 11.39% 0.69%

Earnings & Valuation

This table compares American Capital Mortgage Investment Corp. and Starwood Property Trust’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Capital Mortgage Investment Corp. $158.84 million 5.56 $101.67 million $2.22 8.69
Starwood Property Trust $546.16 million 10.58 $456.67 million $1.76 12.65

Starwood Property Trust has higher revenue and earnings than American Capital Mortgage Investment Corp.. American Capital Mortgage Investment Corp. is trading at a lower price-to-earnings ratio than Starwood Property Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Starwood Property Trust beats American Capital Mortgage Investment Corp. on 9 of the 16 factors compared between the two stocks.

About American Capital Mortgage Investment Corp.

MTGE Investment Corp., formerly American Capital Mortgage Investment Corp., is a real estate investment trust. The Company invests in, finances and manages a leveraged portfolio of real estate-related investments, which include agency residential mortgage-backed securities (RMBS), non-agency securities, other mortgage-related investments and other real estate investments. Agency RMBS includes residential mortgage pass-through certificates and collateralized mortgage obligations (CMOs) structured from residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (GSE), or by a United States Government agency, such as Government National Mortgage Association (Ginnie Mae). Non-agency securities include securities backed by residential mortgages that are not guaranteed by a GSE or the United States Government agency, and credit risk transfer securities (CRT). The Company’s manager is MTGE Management, LLC.

About Starwood Property Trust

Starwood Property Trust, Inc. is a real estate investment trust. The Company operates through three business segments: Real estate lending (the Lending Segment), which engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities, and other real estate and real estate-related debt investments; Real estate investing and servicing (the Investing and Servicing Segment), which includes a servicing business in the United States that manages and works out problem assets; an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, and a mortgage loan business, and Real estate property (the Property Segment), which engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties.

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