Capstead Mortgage Corporation (CMO) and New Residential Investment Corp. (NRZ) Financial Analysis

Capstead Mortgage Corporation (NYSE: CMO) and New Residential Investment Corp. (NYSE:NRZ) are both mortgage reits companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, earnings, institutional ownership, valuation, risk, analyst recommendations and dividends.

Valuation & Earnings

This table compares Capstead Mortgage Corporation and New Residential Investment Corp.’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Capstead Mortgage Corporation $213.33 million 4.00 $82.87 million $0.60 14.80
New Residential Investment Corp. $1.08 billion 4.98 $504.45 million $3.09 5.65

New Residential Investment Corp. has higher revenue and earnings than Capstead Mortgage Corporation. New Residential Investment Corp. 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 Ratings

This is a summary of current recommendations and price targets for Capstead Mortgage Corporation and New Residential Investment Corp., as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstead Mortgage Corporation 0 2 0 0 2.00
New Residential Investment Corp. 0 1 6 0 2.86

Capstead Mortgage Corporation currently has a consensus target price of $11.00, suggesting a potential upside of 23.87%. New Residential Investment Corp. has a consensus target price of $18.15, suggesting a potential upside of 3.95%. Given Capstead Mortgage Corporation’s higher probable upside, research analysts plainly believe Capstead Mortgage Corporation is more favorable than New Residential Investment Corp..

Profitability

This table compares Capstead Mortgage Corporation and New Residential Investment Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capstead Mortgage Corporation 34.00% 7.16% 0.54%
New Residential Investment Corp. 60.06% 19.38% 3.99%

Institutional & Insider Ownership

70.6% of Capstead Mortgage Corporation shares are held by institutional investors. Comparatively, 48.0% of New Residential Investment Corp. shares are held by institutional investors. 1.7% of Capstead Mortgage Corporation shares are held by insiders. Comparatively, 4.0% of New Residential Investment Corp. shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility and Risk

Capstead Mortgage Corporation has a beta of 0.3, suggesting that its share price is 70% less volatile than the S&P 500. Comparatively, New Residential Investment Corp. has a beta of 1.04, suggesting that its share price is 4% more volatile than the S&P 500.

Dividends

Capstead Mortgage Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 8.6%. New Residential Investment Corp. pays an annual dividend of $2.00 per share and has a dividend yield of 11.5%. Capstead Mortgage Corporation pays out 126.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Residential Investment Corp. pays out 64.7% of its earnings in the form of a dividend. Capstead Mortgage Corporation has raised its dividend for 3 consecutive years and New Residential Investment Corp. has raised its dividend for 3 consecutive years. New Residential Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

New Residential Investment Corp. beats Capstead Mortgage Corporation on 13 of the 16 factors compared between the two stocks.

Capstead Mortgage Corporation Company Profile

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.

New Residential Investment Corp. Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

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