Critical Comparison: Ellington Credit (NYSE:EARN) vs. Franklin BSP Realty Trust (NYSE:FBRT)

Ellington Credit (NYSE:EARN) and Franklin BSP Realty Trust (NYSE:FBRT) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations for Ellington Credit and Franklin BSP Realty Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Credit	0	1	1	0	2.50
Franklin BSP Realty Trust	2	0	3	0	2.20

Ellington Credit currently has a consensus target price of $5.75, indicating a potential upside of 30.80%. Franklin BSP Realty Trust has a consensus target price of $11.50, indicating a potential upside of 36.48%. Given Franklin BSP Realty Trust’s higher probable upside, analysts clearly believe Franklin BSP Realty Trust is more favorable than Ellington Credit.

Dividends

Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 21.8%. Franklin BSP Realty Trust pays an annual dividend of $0.80 per share and has a dividend yield of 9.5%. Ellington Credit pays out -92.3% of its earnings in the form of a dividend. Franklin BSP Realty Trust pays out 156.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ellington Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Ellington Credit and Franklin BSP Realty Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Credit	-75.00%	16.47%	3.87%
Franklin BSP Realty Trust	24.26%	6.46%	1.34%

Volatility & Risk

Ellington Credit has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Franklin BSP Realty Trust has a beta of 0.92, suggesting that its share price is 8% less volatile than the S&P 500.

Institutional and Insider Ownership

20.4% of Ellington Credit shares are held by institutional investors. Comparatively, 59.9% of Franklin BSP Realty Trust shares are held by institutional investors. 1.4% of Ellington Credit shares are held by company insiders. Comparatively, 1.3% of Franklin BSP Realty Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Ellington Credit and Franklin BSP Realty Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Credit	$51.80 million	3.19	-$38.85 million	($1.04)	-4.23
Franklin BSP Realty Trust	$270.07 million	2.40	$82.27 million	$0.51	16.52

Franklin BSP Realty Trust has higher revenue and earnings than Ellington Credit. Ellington Credit is trading at a lower price-to-earnings ratio than Franklin BSP Realty Trust, indicating that it is currently the more affordable of the two stocks.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based in Old Greenwich, Connecticut.

About Franklin BSP Realty Trust

Benefit Street Partners operates as a self-managed real estate investment trust (REIT). BSP earns income from investing in a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the government-sponsored enterprises (GSEs)), or by an agency of the federal government, Government National Mortgage Association (Ginnie Mae). BSP’s investment strategy focuses on managing a portfolio of residential mortgage investments consisting almost exclusively of ARM Agency Securities. As of December 31, 2012, the Company’s securities consisted of Agency Securities classified as available-for-sale and Residential mortgage securities classified as held-to-maturity.