PennyMac Mortgage Investment Trust (NYSE: PMT) and MFA Financial (NYSE:MFA) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, risk, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Insider and Institutional Ownership

63.4% of PennyMac Mortgage Investment Trust shares are held by institutional investors. Comparatively, 80.3% of MFA Financial shares are held by institutional investors. 1.8% of PennyMac Mortgage Investment Trust shares are held by company insiders. Comparatively, 0.9% of MFA Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares PennyMac Mortgage Investment Trust and MFA Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PennyMac Mortgage Investment Trust 36.07% 7.59% 1.75%
MFA Financial 59.03% 9.33% 2.50%

Valuation and Earnings

This table compares PennyMac Mortgage Investment Trust and MFA Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
PennyMac Mortgage Investment Trust $272.09 million 3.65 $75.81 million $1.42 10.68
MFA Financial $566.49 million 5.45 $312.66 million $0.73 10.66

MFA Financial has higher revenue and earnings than PennyMac Mortgage Investment Trust. MFA Financial is trading at a lower price-to-earnings ratio than PennyMac Mortgage Investment Trust, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

PennyMac Mortgage Investment Trust has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, MFA Financial has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Dividends

PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 12.4%. MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 10.3%. PennyMac Mortgage Investment Trust pays out 132.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MFA Financial pays out 109.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current ratings and price targets for PennyMac Mortgage Investment Trust and MFA Financial, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PennyMac Mortgage Investment Trust 0 3 1 0 2.25
MFA Financial 0 4 1 0 2.20

PennyMac Mortgage Investment Trust presently has a consensus target price of $17.33, suggesting a potential upside of 14.34%. MFA Financial has a consensus target price of $8.75, suggesting a potential upside of 12.47%. Given PennyMac Mortgage Investment Trust’s stronger consensus rating and higher possible upside, equities research analysts clearly believe PennyMac Mortgage Investment Trust is more favorable than MFA Financial.

Summary

MFA Financial beats PennyMac Mortgage Investment Trust on 10 of the 15 factors compared between the two stocks.

PennyMac Mortgage Investment Trust Company Profile

PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. (its Operating Partnership) and its subsidiaries. It operates through two segments: correspondent production and investment activities. Its investment activities segment represents the Company’s investments in mortgage-related assets. The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of MBS, using the services of PNMAC Capital Management (the Manager or PCM) and PennyMac Loan Services, LLC (PLS), both indirect subsidiaries of PennyMac Financial Services, Inc. (PFSI or PennyMac).

MFA Financial Company Profile

MFA Financial, Inc. is engaged in the real estate finance business. The Company’s subsidiaries invest in residential mortgage assets, including Non-Agency mortgage-backed securities (MBS), Agency MBS, residential whole loans and credit risk transfer (CRT) securities. The Company’s Non-Agency MBS portfolio primarily consists of Legacy Non-Agency MBS and 3 Year Step-up securities. In addition to Non-Agency MBS investments, the Company invests in re-performing and non-performing residential whole loans through its interests in certain consolidated trusts. The mortgages collateralizing its Agency MBS portfolio are predominantly Hybrids, 15-year fixed-rate mortgages and adjustable-rate mortgages (ARMs).

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