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

Insider and Institutional Ownership

80.1% of MFA Financial shares are held by institutional investors. Comparatively, 72.6% of Capstead Mortgage Corporation shares are held by institutional investors. 0.9% of MFA Financial shares are held by insiders. Comparatively, 1.7% of Capstead Mortgage Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 9.1%. Capstead Mortgage Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 7.9%. MFA Financial pays out 102.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. 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. Capstead Mortgage Corporation has raised its dividend for 3 consecutive years. MFA Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

MFA Financial has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Capstead Mortgage Corporation has a beta of 0.38, indicating that its stock price is 62% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
MFA Financial 61.94% 10.12% 2.58%
Capstead Mortgage Corporation 35.05% 7.31% 0.56%

Earnings & Valuation

This table compares MFA Financial and Capstead Mortgage Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
MFA Financial $376.15 million 9.22 $309.13 million $0.78 11.22
Capstead Mortgage Corporation $88.27 million 10.54 $58.62 million $0.61 15.87

MFA Financial has higher revenue and earnings than Capstead Mortgage Corporation. MFA Financial 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.

Analyst Recommendations

This is a summary of recent recommendations for MFA Financial and Capstead Mortgage Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MFA Financial 0 2 2 0 2.50
Capstead Mortgage Corporation 0 2 0 0 2.00

MFA Financial currently has a consensus price target of $8.50, suggesting a potential downside of 2.86%. Capstead Mortgage Corporation has a consensus price target of $11.00, suggesting a potential upside of 13.64%. Given Capstead Mortgage Corporation’s higher probable upside, analysts plainly believe Capstead Mortgage Corporation is more favorable than MFA Financial.

Summary

MFA Financial beats Capstead Mortgage Corporation on 12 of the 17 factors compared between the two stocks.

About MFA Financial

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).

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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