Annaly Capital Management (NYSE: NLY) and Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitabiliy, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.

Dividends

Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 9.6%. Cherry Hill Mortgage Investment Corporation pays an annual dividend of $1.96 per share and has a dividend yield of 10.4%. Annaly Capital Management pays out 46.5% of its earnings in the form of a dividend. Cherry Hill Mortgage Investment Corporation pays out 27.5% 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. Cherry Hill Mortgage Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Annaly Capital Management and Cherry Hill Mortgage Investment Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Annaly Capital Management $3.06 billion 4.15 $2.63 billion $2.58 4.83
Cherry Hill Mortgage Investment Corporation $67.37 million 3.56 $90.68 million $7.14 2.64

Annaly Capital Management has higher revenue and earnings than Cherry Hill Mortgage Investment Corporation. Cherry Hill Mortgage Investment Corporation is trading at a lower price-to-earnings ratio than Annaly Capital Management, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations and price targets for Annaly Capital Management and Cherry Hill Mortgage Investment Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Annaly Capital Management 1 5 2 0 2.13
Cherry Hill Mortgage Investment Corporation 0 2 2 0 2.50

Annaly Capital Management currently has a consensus target price of $11.14, suggesting a potential downside of 10.57%. Cherry Hill Mortgage Investment Corporation has a consensus target price of $18.50, suggesting a potential downside of 1.91%. Given Cherry Hill Mortgage Investment Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Cherry Hill Mortgage Investment Corporation is more favorable than Annaly Capital Management.

Risk and Volatility

Annaly Capital Management has a beta of 0.31, suggesting that its share price is 69% less volatile than the S&P 500. Comparatively, Cherry Hill Mortgage Investment Corporation has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500.

Insider & Institutional Ownership

54.9% of Annaly Capital Management shares are held by institutional investors. Comparatively, 47.9% of Cherry Hill Mortgage Investment Corporation shares are held by institutional investors. 0.5% of Annaly Capital Management shares are held by company insiders. Comparatively, 8.9% of Cherry Hill Mortgage Investment Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Annaly Capital Management and Cherry Hill Mortgage Investment Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Annaly Capital Management 113.76% 11.08% 1.50%
Cherry Hill Mortgage Investment Corporation 155.62% 9.35% 1.95%

Summary

Cherry Hill Mortgage Investment Corporation beats Annaly Capital Management on 9 of the 15 factors compared between the two stocks.

Annaly Capital Management Company Profile

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

Cherry Hill Mortgage Investment Corporation Company Profile

Cherry Hill Mortgage Investment Corporation is a residential real estate finance company. The Company is focused on acquiring, investing in and managing residential mortgage assets in the United States. Its principal objective is to generate attractive current yields and risk-adjusted total returns for its stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. The Company focuses on attaining this objective, subject to market conditions and availability and terms of financing, by selectively constructing and managing a targeted portfolio of Servicing Related Assets, residential mortgage-backed securities (RMBS), prime mortgage loans and other cashflowing residential mortgage assets. The Company operates its business through segments, including investments in RMBS; investments in Servicing Related Assets, and All Other. The Company is externally managed by Cherry Hill Mortgage Management, LLC.

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