Cherry Hill Mortgage Investment (NYSE:CHMI – Get Free Report) and New Mountain Finance (NASDAQ:NMFC – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.
Dividends
Cherry Hill Mortgage Investment pays an annual dividend of $0.40 per share and has a dividend yield of 15.3%. New Mountain Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.5%. Cherry Hill Mortgage Investment pays out 222.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Mountain Finance pays out -212.8% of its earnings in the form of a dividend. Cherry Hill Mortgage Investment has raised its dividend for 1 consecutive years. Cherry Hill Mortgage Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Analyst Recommendations
This is a breakdown of current ratings for Cherry Hill Mortgage Investment and New Mountain Finance, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Cherry Hill Mortgage Investment | 0 | 4 | 1 | 0 | 2.20 |
| New Mountain Finance | 1 | 4 | 0 | 0 | 1.80 |
Earnings and Valuation
This table compares Cherry Hill Mortgage Investment and New Mountain Finance”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Cherry Hill Mortgage Investment | $61.10 million | 1.59 | $6.83 million | $0.18 | 14.56 |
| New Mountain Finance | $327.08 million | 2.00 | $16.49 million | ($0.47) | -14.72 |
New Mountain Finance has higher revenue and earnings than Cherry Hill Mortgage Investment. New Mountain Finance is trading at a lower price-to-earnings ratio than Cherry Hill Mortgage Investment, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
18.5% of Cherry Hill Mortgage Investment shares are owned by institutional investors. Comparatively, 32.1% of New Mountain Finance shares are owned by institutional investors. 1.6% of Cherry Hill Mortgage Investment shares are owned by company insiders. Comparatively, 14.9% of New Mountain Finance shares are owned by company 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 Cherry Hill Mortgage Investment and New Mountain Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Cherry Hill Mortgage Investment | 26.43% | 21.74% | 1.85% |
| New Mountain Finance | -16.78% | 10.94% | 4.58% |
Volatility & Risk
Cherry Hill Mortgage Investment has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500. Comparatively, New Mountain Finance has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500.
Summary
Cherry Hill Mortgage Investment beats New Mountain Finance on 9 of the 17 factors compared between the two stocks.
About Cherry Hill Mortgage Investment
Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Cherry Hill Mortgage Investment Corporation was incorporated in 2012 and is based in Farmingdale, New Jersey.
About New Mountain Finance
New Mountain Finance Corporation (Nasdaq: NMFC), a business development company is a private equity / buyouts and loan fund specializes in directly investing and lending to middle market companies in defensive growth industries. The fund prefers investing in buyout and middle market companies. It also makes investments in debt securities at all levels of the capital structure including first and second lien debt, unsecured notes, and mezzanine securities. In some cases, its investments may also include equity interests. It targets energy, engineering and consulting services, specialty chemicals and materials, trading companies and distributors, commercial printing, diversified support services, education services, environmental and facilities services, office services and supplies, media, distributors, health care services, health care facilities, application software, business services, systems software, federal services, distribution and logistics, interactive home entertainment, telecommunication services, hydroelectric power generation, electric power generation by fossil fuels, electric power generation by nuclear fuels, health care technology, and security and alarm services. The fund seeks to invest in United States of America. It seeks to invest between $10 million and $125 million per transaction. The firm invests through both primary originations and open-market secondary purchases. It invests in companies with EBITDA between $10 million and $200 million. The fund seeks a majority stake in its portfolio companies.
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