American Capital Agency Corp. (AGNC) vs. Chimera Investment Corporation (CIM) Critical Analysis

American Capital Agency Corp. (NASDAQ: AGNC) and Chimera Investment Corporation (NYSE:CIM) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Volatility and Risk

American Capital Agency Corp. has a beta of 0.2, suggesting that its stock price is 80% less volatile than the S&P 500. Comparatively, Chimera Investment Corporation has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for American Capital Agency Corp. and Chimera Investment Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Agency Corp. 1 5 2 0 2.13
Chimera Investment Corporation 0 4 0 0 2.00

American Capital Agency Corp. currently has a consensus price target of $19.61, indicating a potential downside of 8.80%. Chimera Investment Corporation has a consensus price target of $18.83, indicating a potential downside of 0.77%. Given Chimera Investment Corporation’s higher probable upside, analysts clearly believe Chimera Investment Corporation is more favorable than American Capital Agency Corp..

Insider & Institutional Ownership

56.1% of American Capital Agency Corp. shares are held by institutional investors. Comparatively, 52.2% of Chimera Investment Corporation shares are held by institutional investors. 0.5% of American Capital Agency Corp. shares are held by insiders. Comparatively, 0.7% of Chimera Investment Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

American Capital Agency Corp. pays an annual dividend of $2.16 per share and has a dividend yield of 10.0%. Chimera Investment Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 10.5%. American Capital Agency Corp. pays out 44.6% of its earnings in the form of a dividend. Chimera Investment Corporation pays out 57.3% 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. Chimera Investment 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.

Profitability

This table compares American Capital Agency Corp. and Chimera Investment Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Capital Agency Corp. 161.49% 12.08% 1.55%
Chimera Investment Corporation 63.94% 14.27% 2.52%

Earnings & Valuation

This table compares American Capital Agency Corp. and Chimera Investment Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Capital Agency Corp. $1.70 billion N/A N/A $4.84 4.44
Chimera Investment Corporation $933.35 million 3.82 $655.36 million $3.49 5.44

Chimera Investment Corporation has higher revenue, but lower earnings than American Capital Agency Corp.. American Capital Agency Corp. is trading at a lower price-to-earnings ratio than Chimera Investment Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

Chimera Investment Corporation beats American Capital Agency Corp. on 8 of the 15 factors compared between the two stocks.

About American Capital Agency Corp.

AGNC Investment Corp., formerly American Capital Agency Corp., is a real estate investment trust. The Company invests in agency residential mortgage-backed securities on a leveraged basis. Its investments consist of residential mortgage pass-through securities and collateralized mortgage obligations (CMOs) for which the principal and interest payments are guaranteed by a government-sponsored enterprise, such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), or by the United States Government agency, such as the Government National Mortgage Association (Ginnie Mae) (collectively, GSEs). Its agency securities include agency residential mortgage-backed securities (Agency RMBS) and to-be-announced forward contracts (TBAs). Its Non-Agency Securities include credit risk transfer securities (CRT), non-agency residential mortgage-backed securities (Non-Agency RMBS) and commercial mortgage-backed securities (CMBS).

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.

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