Critical Contrast: KKR Real Estate Finance Trust (NYSE:KREF) vs. Annaly Capital Management (NYSE:NLY)

Annaly Capital Management (NYSE:NLY) and KKR Real Estate Finance Trust (NYSE:KREF) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, profitability, risk, analyst recommendations, valuation, institutional ownership and dividends.

Volatility and Risk

Annaly Capital Management has a beta of 1.24, meaning that its share price is 24% more volatile than the S&P 500. Comparatively, KKR Real Estate Finance Trust has a beta of 0.91, meaning that its share price is 9% less volatile than the S&P 500.

Institutional & Insider Ownership

51.6% of Annaly Capital Management shares are held by institutional investors. Comparatively, 70.2% of KKR Real Estate Finance Trust shares are held by institutional investors. 0.2% of Annaly Capital Management shares are held by company insiders. Comparatively, 2.1% of KKR Real Estate Finance Trust shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings for Annaly Capital Management and KKR Real Estate Finance Trust, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Annaly Capital Management	0	4	7	1	2.75
KKR Real Estate Finance Trust	2	5	1	1	2.11

Annaly Capital Management presently has a consensus price target of $21.67, indicating a potential upside of 14.93%. KKR Real Estate Finance Trust has a consensus price target of $8.67, indicating a potential upside of 51.91%. Given KKR Real Estate Finance Trust’s higher possible upside, analysts clearly believe KKR Real Estate Finance Trust is more favorable than Annaly Capital Management.

Dividends

Annaly Capital Management pays an annual dividend of $3.00 per share and has a dividend yield of 15.9%. KKR Real Estate Finance Trust pays an annual dividend of $0.40 per share and has a dividend yield of 7.0%. Annaly Capital Management pays out 209.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR Real Estate Finance Trust pays out -11.4% of its earnings in the form of a dividend. Annaly Capital Management has increased its dividend for 2 consecutive years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Annaly Capital Management and KKR Real Estate Finance Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Annaly Capital Management	$5.96 billion	2.49	$2.03 billion	$1.43	13.18
KKR Real Estate Finance Trust	$435.60 million	0.75	-$47.05 million	($3.51)	-1.63

Annaly Capital Management has higher revenue and earnings than KKR Real Estate Finance Trust. KKR Real Estate Finance Trust 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.

Profitability

This table compares Annaly Capital Management and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Annaly Capital Management	15.52%	16.65%	1.72%
KKR Real Estate Finance Trust	-58.12%	-1.45%	-0.25%

Summary

Annaly Capital Management beats KKR Real Estate Finance Trust on 13 of the 17 factors compared between the two stocks.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc., a mortgage real estate investment trust, focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets. It engages in the origination and purchase of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans. The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. KKR Real Estate Finance Trust Inc. was incorporated in 2014 and is headquartered in New York, New York.