Cherry Hill Mortgage Investment Corporation (NYSE: CHMI) and Invesco Mortgage Capital (NYSE:IVR) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, risk, analyst recommendations, earnings, valuation, profitability and institutional ownership.

Volatility & Risk

Cherry Hill Mortgage Investment Corporation has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500. Comparatively, Invesco Mortgage Capital has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500.

Dividends

Cherry Hill Mortgage Investment Corporation pays an annual dividend of $1.96 per share and has a dividend yield of 10.8%. Invesco Mortgage Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.4%. Cherry Hill Mortgage Investment Corporation pays out 28.1% of its earnings in the form of a dividend. Invesco Mortgage Capital pays out 36.9% 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Cherry Hill Mortgage Investment Corporation 138.90% 9.49% 1.81%
Invesco Mortgage Capital 71.92% 8.97% 1.11%

Earnings and Valuation

This table compares Cherry Hill Mortgage Investment Corporation and Invesco Mortgage Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cherry Hill Mortgage Investment Corporation $65.25 million 3.54 $88.70 million $6.98 2.61
Invesco Mortgage Capital $609.31 million 3.11 $484.39 million $4.34 3.91

Invesco Mortgage Capital 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 Invesco Mortgage Capital, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

62.4% of Cherry Hill Mortgage Investment Corporation shares are held by institutional investors. Comparatively, 63.4% of Invesco Mortgage Capital shares are held by institutional investors. 8.9% of Cherry Hill Mortgage Investment Corporation shares are held by company insiders. Comparatively, 0.3% of Invesco Mortgage Capital shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Cherry Hill Mortgage Investment Corporation and Invesco Mortgage Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cherry Hill Mortgage Investment Corporation 0 2 2 0 2.50
Invesco Mortgage Capital 0 2 2 0 2.50

Cherry Hill Mortgage Investment Corporation currently has a consensus target price of $18.50, indicating a potential upside of 1.65%. Invesco Mortgage Capital has a consensus target price of $17.75, indicating a potential upside of 4.60%. Given Invesco Mortgage Capital’s higher probable upside, analysts plainly believe Invesco Mortgage Capital is more favorable than Cherry Hill Mortgage Investment Corporation.

Summary

Cherry Hill Mortgage Investment Corporation beats Invesco Mortgage Capital on 8 of the 14 factors compared between the two stocks.

About Cherry Hill Mortgage Investment Corporation

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.

About Invesco Mortgage Capital

Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.

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