Critical Survey: Capstead Mortgage (CMO) & Invesco Mortgage Capital (IVR)
Capstead Mortgage (NYSE: CMO) and Invesco Mortgage Capital (NYSE:IVR) are both financials companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, profitability and dividends.
Valuation & Earnings
This table compares Capstead Mortgage and Invesco Mortgage Capital’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Capstead Mortgage||$213.33 million||4.19||$82.87 million||$0.60||15.48|
|Invesco Mortgage Capital||$456.86 million||4.45||$254.41 million||$3.72||4.90|
This table compares Capstead Mortgage and Invesco Mortgage Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Invesco Mortgage Capital||66.86%||9.06%||1.09%|
Institutional and Insider Ownership
73.0% of Capstead Mortgage shares are owned by institutional investors. Comparatively, 63.2% of Invesco Mortgage Capital shares are owned by institutional investors. 1.7% of Capstead Mortgage shares are owned by insiders. Comparatively, 0.3% of Invesco Mortgage Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.2%. Invesco Mortgage Capital pays an annual dividend of $1.64 per share and has a dividend yield of 9.0%. Capstead Mortgage pays out 126.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Invesco Mortgage Capital pays out 44.1% of its earnings in the form of a dividend. Capstead Mortgage has increased its dividend for 3 consecutive years. Invesco Mortgage Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a summary of recent recommendations for Capstead Mortgage and Invesco Mortgage Capital, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Invesco Mortgage Capital||0||2||2||0||2.50|
Capstead Mortgage presently has a consensus price target of $11.00, indicating a potential upside of 18.41%. Invesco Mortgage Capital has a consensus price target of $18.13, indicating a potential downside of 0.47%. Given Capstead Mortgage’s higher probable upside, equities analysts clearly believe Capstead Mortgage is more favorable than Invesco Mortgage Capital.
Risk and Volatility
Capstead Mortgage has a beta of 0.3, meaning that its stock price is 70% less volatile than the S&P 500. Comparatively, Invesco Mortgage Capital has a beta of 0.86, meaning that its stock price is 14% less volatile than the S&P 500.
Invesco Mortgage Capital beats Capstead Mortgage on 11 of the 16 factors compared between the two stocks.
Capstead Mortgage Company Profile
Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.
Invesco Mortgage Capital Company Profile
Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.
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