Annaly Capital Management (NYSE: NLY) and MFA Financial (NYSE:MFA) are both mid-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, valuation and profitability.

Dividends

Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 9.7%. MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 9.1%. Annaly Capital Management pays out 41.5% of its earnings in the form of a dividend. MFA Financial pays out 102.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Annaly Capital Management and MFA Financial’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Annaly Capital Management $3.30 billion 4.08 $3.14 billion $2.89 4.28
MFA Financial $376.15 million 9.22 $309.13 million $0.78 11.22

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

Volatility and Risk

Annaly Capital Management has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500. Comparatively, MFA Financial has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Annaly Capital Management and MFA Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Annaly Capital Management 1 3 2 0 2.17
MFA Financial 0 4 2 0 2.33

Annaly Capital Management currently has a consensus price target of $11.25, indicating a potential downside of 9.13%. MFA Financial has a consensus price target of $8.10, indicating a potential downside of 7.43%. Given MFA Financial’s stronger consensus rating and higher possible upside, analysts plainly believe MFA Financial is more favorable than Annaly Capital Management.

Insider & Institutional Ownership

53.0% of Annaly Capital Management shares are owned by institutional investors. Comparatively, 76.9% of MFA Financial shares are owned by institutional investors. 0.4% of Annaly Capital Management shares are owned by insiders. Comparatively, 0.9% of MFA Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Annaly Capital Management and MFA Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Annaly Capital Management 121.84% 11.33% 1.52%
MFA Financial 61.94% 10.12% 2.58%

Summary

MFA Financial beats Annaly Capital Management on 8 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.

MFA Financial Company Profile

MFA Financial, Inc. is engaged in the real estate finance business. The Company’s subsidiaries invest in residential mortgage assets, including Non-Agency mortgage-backed securities (MBS), Agency MBS, residential whole loans and credit risk transfer (CRT) securities. The Company’s Non-Agency MBS portfolio primarily consists of Legacy Non-Agency MBS and 3 Year Step-up securities. In addition to Non-Agency MBS investments, the Company invests in re-performing and non-performing residential whole loans through its interests in certain consolidated trusts. The mortgages collateralizing its Agency MBS portfolio are predominantly Hybrids, 15-year fixed-rate mortgages and adjustable-rate mortgages (ARMs).

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