Contrasting Western Asset Mortgage Capital Corporation (NYSE:WMC) and Dynex Capital (DX)

Western Asset Mortgage Capital Corporation (NYSE: WMC) and Dynex Capital (NYSE:DX) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, profitability, valuation and earnings.

Earnings and Valuation

This table compares Western Asset Mortgage Capital Corporation and Dynex Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital Corporation $59.85 million 7.40 $34.37 million $0.82 12.89
Dynex Capital $105.39 million 3.33 $75.82 million $1.54 4.62

Dynex Capital has higher revenue and earnings than Western Asset Mortgage Capital Corporation. Dynex Capital is trading at a lower price-to-earnings ratio than Western Asset Mortgage Capital Corporation, indicating that it is currently the more affordable of the two stocks.

Dividends

Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 11.7%. Dynex Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. Western Asset Mortgage Capital Corporation pays out 151.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Dynex Capital pays out 46.8% of its earnings in the form of a dividend.

Risk & Volatility

Western Asset Mortgage Capital Corporation has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500. Comparatively, Dynex Capital has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Western Asset Mortgage Capital Corporation and Dynex Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital Corporation 0 2 0 0 2.00
Dynex Capital 0 3 0 0 2.00

Western Asset Mortgage Capital Corporation currently has a consensus target price of $10.00, suggesting a potential downside of 5.39%. Dynex Capital has a consensus target price of $7.13, suggesting a potential upside of 0.07%. Given Dynex Capital’s higher probable upside, analysts plainly believe Dynex Capital is more favorable than Western Asset Mortgage Capital Corporation.

Insider & Institutional Ownership

38.0% of Western Asset Mortgage Capital Corporation shares are held by institutional investors. Comparatively, 44.2% of Dynex Capital shares are held by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are held by insiders. Comparatively, 7.1% of Dynex Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Western Asset Mortgage Capital Corporation and Dynex Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital Corporation 30.83% 5.97% 0.83%
Dynex Capital 93.54% 11.04% 1.25%

Summary

Dynex Capital beats Western Asset Mortgage Capital Corporation on 11 of the 14 factors compared between the two stocks.

About Western Asset Mortgage Capital Corporation

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

About Dynex Capital

Dynex Capital, Inc. is an internally managed mortgage real estate investment trust, which invests in residential and commercial mortgage securities on a leveraged basis. The Company’s objective is to provide attractive risk-adjusted returns to its shareholders over the long term that is reflective of a leveraged fixed income portfolio with a focus on capital preservation. It seeks to provide returns to its shareholders through regular quarterly dividends and through capital appreciation. It invests in Agency and non-Agency mortgage-backed securities (MBS). MBS consists of residential MBS (RMBS), commercial MBS (CMBS) and CMBS interest-only securities. Agency MBS have a guaranty of principal payment by an agency of the United States Government or a government-sponsored entity (GSE), such as Fannie Mae and Freddie Mac.

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