Capstead Mortgage (NYSE: CMO) and PennyMac Mortgage Investment Trust (NYSE:PMT) are both small-cap financials companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, earnings, dividends, valuation and profitability.
Institutional and Insider Ownership
73.0% of Capstead Mortgage shares are owned by institutional investors. Comparatively, 63.0% of PennyMac Mortgage Investment Trust shares are owned by institutional investors. 1.7% of Capstead Mortgage shares are owned by insiders. Comparatively, 2.1% of PennyMac Mortgage Investment Trust shares are owned 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.
Capstead Mortgage has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500.
This is a breakdown of current ratings for Capstead Mortgage and PennyMac Mortgage Investment Trust, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|PennyMac Mortgage Investment Trust||0||2||1||0||2.33|
Capstead Mortgage presently has a consensus target price of $11.00, suggesting a potential upside of 23.18%. PennyMac Mortgage Investment Trust has a consensus target price of $18.50, suggesting a potential upside of 12.39%. Given Capstead Mortgage’s stronger consensus rating and higher probable upside, analysts clearly believe Capstead Mortgage is more favorable than PennyMac Mortgage Investment Trust.
Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.5%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 11.4%. 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. PennyMac Mortgage Investment Trust pays out 143.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennyMac Mortgage Investment Trust has increased its dividend for 3 consecutive years. PennyMac Mortgage Investment Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Valuation and Earnings
This table compares Capstead Mortgage and PennyMac Mortgage Investment Trust’s gross 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||4.02||$82.87 million||$0.60||14.88|
|PennyMac Mortgage Investment Trust||$272.09 million||3.97||$75.81 million||$1.31||12.56|
Capstead Mortgage has higher earnings, but lower revenue than PennyMac Mortgage Investment Trust. PennyMac Mortgage Investment Trust is trading at a lower price-to-earnings ratio than Capstead Mortgage, indicating that it is currently the more affordable of the two stocks.
This table compares Capstead Mortgage and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|PennyMac Mortgage Investment Trust||36.07%||7.59%||1.75%|
PennyMac Mortgage Investment Trust beats Capstead Mortgage on 9 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.
PennyMac Mortgage Investment Trust Company Profile
PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. (its Operating Partnership) and its subsidiaries. It operates through two segments: correspondent production and investment activities. Its investment activities segment represents the Company’s investments in mortgage-related assets. The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of MBS, using the services of PNMAC Capital Management (the Manager or PCM) and PennyMac Loan Services, LLC (PLS), both indirect subsidiaries of PennyMac Financial Services, Inc. (PFSI or PennyMac).
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