Office Properties Income Trust (NASDAQ:OPI) and Ellington Financial (NYSE:EFC) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, institutional ownership, risk, dividends, earnings and profitability.
Risk & Volatility
Office Properties Income Trust has a beta of 1.65, suggesting that its share price is 65% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.45, suggesting that its share price is 55% less volatile than the S&P 500.
93.7% of Office Properties Income Trust shares are held by institutional investors. Comparatively, 48.6% of Ellington Financial shares are held by institutional investors. 1.7% of Office Properties Income Trust shares are held by company insiders. Comparatively, 12.1% of Ellington Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Office Properties Income Trust pays an annual dividend of $2.20 per share and has a dividend yield of 8.9%. Ellington Financial pays an annual dividend of $0.56 per share and has a dividend yield of 3.1%. Office Properties Income Trust pays out 27.7% of its earnings in the form of a dividend. Ellington Financial pays out 39.7% 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. Office Properties Income Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a breakdown of current recommendations and price targets for Office Properties Income Trust and Ellington Financial, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Office Properties Income Trust||1||1||0||0||1.50|
Office Properties Income Trust presently has a consensus target price of $26.00, indicating a potential upside of 5.73%. Ellington Financial has a consensus target price of $18.63, indicating a potential upside of 2.50%. Given Office Properties Income Trust’s higher probable upside, analysts plainly believe Office Properties Income Trust is more favorable than Ellington Financial.
This table compares Office Properties Income Trust and Ellington Financial’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Office Properties Income Trust||1.13%||0.95%||0.34%|
Earnings and Valuation
This table compares Office Properties Income Trust and Ellington Financial’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Office Properties Income Trust||$426.56 million||2.77||-$21.88 million||$7.95||3.09|
|Ellington Financial||$135.04 million||4.00||$46.68 million||$1.41||12.89|
Ellington Financial has lower revenue, but higher earnings than Office Properties Income Trust. Office Properties Income Trust is trading at a lower price-to-earnings ratio than Ellington Financial, indicating that it is currently the more affordable of the two stocks.
Ellington Financial beats Office Properties Income Trust on 9 of the 16 factors compared between the two stocks.
About Office Properties Income Trust
Office Properties Income Trust is a real estate investment trust, or REIT, which owns buildings primarily leased to single tenants and those with high credit quality characteristics like government entities. In December 2018, our predecessor company Government Properties Income Trust, or GOV, merged with Select Income REIT, or SIR, and the combined company was renamed Office Properties Income Trust, or OPI. Combining the two companies creates a national office REIT with increased scale, enhanced tenant and geographic diversification, a well-laddered lease expiration schedule, a broader investment strategy, and a company with one of the highest percentages of rent paid by investment grade rated tenants in the office sector.
About Ellington Financial
Ellington Financial LLC, through its subsidiary Ellington Financial Operating Partnership LLC, operates as a specialty finance company in the United States. The company acquires and manages mortgage-related assets, including residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime residential mortgage loans; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; commercial mortgage loans and other commercial real estate debt; and residential mortgage loans. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; equity investments in mortgage-related entities; and other strategic investments, as well as invests in corporate debt and equity securities. In addition, it offers consumer loans and asset-backed securities backed by consumer and commercial assets. Ellington Financial LLC was founded in 2007 and is based in Old Greenwich, Connecticut.
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