Analyzing MFA Financial (MFA) and New Residential Investment (NRZ)

MFA Financial (NYSE: MFA) and New Residential Investment (NYSE:NRZ) are both mid-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, dividends, risk, institutional ownership, profitability and valuation.

Profitability

This table compares MFA Financial and New Residential Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
MFA Financial 59.03% 9.33% 2.50%
New Residential Investment 60.06% 19.38% 3.99%

Institutional & Insider Ownership

80.7% of MFA Financial shares are held by institutional investors. Comparatively, 48.6% of New Residential Investment shares are held by institutional investors. 0.9% of MFA Financial shares are held by company insiders. Comparatively, 4.0% of New Residential Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

MFA Financial pays an annual dividend of $0.80 per share and has a dividend yield of 9.7%. New Residential Investment pays an annual dividend of $2.00 per share and has a dividend yield of 10.9%. MFA Financial pays out 109.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Residential Investment pays out 64.7% of its earnings in the form of a dividend. MFA Financial has increased its dividend for 3 consecutive years. New Residential Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

MFA Financial has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500. Comparatively, New Residential Investment has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500.

Valuation and Earnings

This table compares MFA Financial and New Residential Investment’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MFA Financial $566.49 million 5.75 $312.66 million $0.73 11.25
New Residential Investment $1.08 billion 5.22 $504.45 million $3.09 5.92

New Residential Investment has higher revenue and earnings than MFA Financial. New Residential Investment is trading at a lower price-to-earnings ratio than MFA Financial, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current recommendations for MFA Financial and New Residential Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MFA Financial 0 4 1 0 2.20
New Residential Investment 0 1 6 0 2.86

MFA Financial presently has a consensus price target of $8.75, indicating a potential upside of 6.58%. New Residential Investment has a consensus price target of $18.33, indicating a potential upside of 0.24%. Given MFA Financial’s higher possible upside, research analysts plainly believe MFA Financial is more favorable than New Residential Investment.

Summary

New Residential Investment beats MFA Financial on 12 of the 17 factors compared between the two stocks.

MFA Financial Company Profile

MFA Financial, Inc. is engaged in the real estate finance business. The Company’s subsidiaries invest in residential mortgage assets, including Non-Agency mortgage-backed securities (MBS), Agency MBS, residential whole loans and credit risk transfer (CRT) securities. The Company’s Non-Agency MBS portfolio primarily consists of Legacy Non-Agency MBS and 3 Year Step-up securities. In addition to Non-Agency MBS investments, the Company invests in re-performing and non-performing residential whole loans through its interests in certain consolidated trusts. The mortgages collateralizing its Agency MBS portfolio are predominantly Hybrids, 15-year fixed-rate mortgages and adjustable-rate mortgages (ARMs).

New Residential Investment Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

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