Invesco Mortgage Capital (NYSE: IVR) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, risk, dividends and analyst recommendations.

Valuation & Earnings

This table compares Invesco Mortgage Capital and Annaly Capital Management’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Invesco Mortgage Capital $609.31 million 3.11 $484.39 million $4.34 3.91
Annaly Capital Management $3.30 billion 4.12 $3.14 billion $2.89 4.33

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

Dividends

Invesco Mortgage Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.4%. Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 9.6%. Invesco Mortgage Capital pays out 36.9% of its earnings in the form of a dividend. Annaly Capital Management pays out 41.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Analyst Recommendations

This is a summary of current ratings and price targets for Invesco Mortgage Capital and Annaly Capital Management, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Invesco Mortgage Capital 0 2 3 0 2.60
Annaly Capital Management 1 3 2 0 2.17

Invesco Mortgage Capital presently has a consensus price target of $17.44, suggesting a potential upside of 2.69%. Annaly Capital Management has a consensus price target of $11.25, suggesting a potential downside of 10.00%. Given Invesco Mortgage Capital’s stronger consensus rating and higher probable upside, equities analysts plainly believe Invesco Mortgage Capital is more favorable than Annaly Capital Management.

Institutional and Insider Ownership

63.4% of Invesco Mortgage Capital shares are held by institutional investors. Comparatively, 51.9% of Annaly Capital Management shares are held by institutional investors. 0.3% of Invesco Mortgage Capital shares are held by insiders. Comparatively, 0.4% of Annaly Capital Management shares are held 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Invesco Mortgage Capital 71.92% 8.97% 1.11%
Annaly Capital Management 121.84% 11.33% 1.52%

Volatility & Risk

Invesco Mortgage Capital has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 0.28, meaning that its stock price is 72% less volatile than the S&P 500.

Invesco Mortgage Capital Company Profile

Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.

Annaly Capital Management Company Profile

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

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