Hatteras Financial Corp. (NYSE: HTS) and Capital Trust (NYSE:BXMT) are both mortgage reits companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, profitability, valuation and risk.

Institutional and Insider Ownership

61.4% of Capital Trust shares are held by institutional investors. 0.9% of Capital Trust 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.

Profitability

This table compares Hatteras Financial Corp. and Capital Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hatteras Financial Corp. N/A -16.93% -1.89%
Capital Trust 53.85% 8.63% 2.32%

Dividends

Capital Trust pays an annual dividend of $2.48 per share and has a dividend yield of 7.7%. Hatteras Financial Corp. does not pay a dividend. Capital Trust pays out 110.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capital Trust has increased its dividend for 3 consecutive years.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Hatteras Financial Corp. and Capital Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hatteras Financial Corp. 0 0 0 0 N/A
Capital Trust 0 3 3 0 2.50

Capital Trust has a consensus target price of $33.33, indicating a potential upside of 3.94%. Given Capital Trust’s higher probable upside, analysts plainly believe Capital Trust is more favorable than Hatteras Financial Corp..

Earnings & Valuation

This table compares Hatteras Financial Corp. and Capital Trust’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Hatteras Financial Corp. N/A N/A N/A ($0.09) -181.00
Capital Trust $313.70 million 9.69 $238.29 million $2.25 14.25

Capital Trust has higher revenue and earnings than Hatteras Financial Corp.. Hatteras Financial Corp. is trading at a lower price-to-earnings ratio than Capital Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Capital Trust beats Hatteras Financial Corp. on 11 of the 12 factors compared between the two stocks.

About Hatteras Financial Corp.

Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.

About Capital Trust

Blackstone Mortgage Trust, Inc. is a holding company. The Company conducts its operations as a real estate investment trust for the United States federal income tax purposes. The Company originates and purchases senior loans collateralized by properties in North America and Europe. The Company’s business is focused on originating or acquiring senior, floating rate mortgage loans that are secured by a first priority mortgage on commercial real estate assets primarily in the office, lodging, retail, residential and industrial sectors. These investments may be in the form of whole loans or may also include pari passu participations within mortgage loans. It directly originates, co-originates and acquires debt instruments in conjunction with acquisitions, refinancings and recapitalizations of commercial real estate. The Company’s manager is BXMT Advisors L.L.C.

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