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

Analyst Ratings

This is a breakdown of recent recommendations for Cherry Hill Mortgage Investment Corporation and Orchid Island Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cherry Hill Mortgage Investment Corporation 0 1 3 0 2.75
Orchid Island Capital 0 1 0 0 2.00

Cherry Hill Mortgage Investment Corporation presently has a consensus target price of $19.25, indicating a potential upside of 7.72%. Given Cherry Hill Mortgage Investment Corporation’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Cherry Hill Mortgage Investment Corporation is more favorable than Orchid Island Capital.

Dividends

Cherry Hill Mortgage Investment Corporation pays an annual dividend of $1.96 per share and has a dividend yield of 11.0%. Orchid Island Capital pays an annual dividend of $1.68 per share and has a dividend yield of 17.2%. Cherry Hill Mortgage Investment Corporation pays out 29.0% of its earnings in the form of a dividend. Orchid Island Capital pays out -289.7% 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. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Cherry Hill Mortgage Investment Corporation $30.72 million 7.40 $24.83 million $6.75 2.65
Orchid Island Capital $87.12 million 5.19 $1.96 million ($0.58) -16.88

Cherry Hill Mortgage Investment Corporation has higher revenue, but lower earnings than Orchid Island Capital. Orchid Island Capital is trading at a lower price-to-earnings ratio than Cherry Hill Mortgage Investment Corporation, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Cherry Hill Mortgage Investment Corporation has a beta of 0.38, suggesting that its stock price is 62% less volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 0.5, suggesting that its stock price is 50% less volatile than the S&P 500.

Insider & Institutional Ownership

62.4% of Cherry Hill Mortgage Investment Corporation shares are owned by institutional investors. Comparatively, 23.5% of Orchid Island Capital shares are owned by institutional investors. 8.9% of Cherry Hill Mortgage Investment Corporation shares are owned by company insiders. Comparatively, 0.9% of Orchid Island Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Cherry Hill Mortgage Investment Corporation 136.70% 9.49% 1.58%
Orchid Island Capital N/A -1.10% -0.11%

Summary

Cherry Hill Mortgage Investment Corporation beats Orchid Island Capital on 11 of the 15 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 Orchid Island Capital

Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities (RMBS). The Company’s business objective is to provide attractive risk-adjusted total returns to its investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. Its portfolio consists of two categories of Agency RMBS: pass-through Agency RMBS and structured Agency RMBS. It invests in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. The mortgage loans underlying pass-through certificates are classified into three categories, including fixed-rate mortgages, adjustable-rate mortgages (ARMs) and Hybrid ARMs. It invests in structured Agency RMBS, which include collateralized mortgage obligations, interest only securities, inverse interest only securities and principal only securities.

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