Head-To-Head Review: Orchid Island Capital (ORC) and Ellington Residential Mortgage REIT (EARN)

Orchid Island Capital (NYSE: ORC) and Ellington Residential Mortgage REIT (NYSE:EARN) are both small-cap financials companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, earnings, dividends, institutional ownership, risk, profitability and valuation.

Earnings & Valuation

This table compares Orchid Island Capital and Ellington Residential Mortgage REIT’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Orchid Island Capital $87.12 million 4.32 $1.96 million ($0.57) -12.46
Ellington Residential Mortgage REIT $24.22 million 5.89 $11.90 million $1.08 9.90

Ellington Residential Mortgage REIT has lower revenue, but higher earnings than Orchid Island Capital. Orchid Island Capital is trading at a lower price-to-earnings ratio than Ellington Residential Mortgage REIT, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Orchid Island Capital has a beta of 0.29, indicating that its share price is 71% less volatile than the S&P 500. Comparatively, Ellington Residential Mortgage REIT has a beta of 0.46, indicating that its share price is 54% less volatile than the S&P 500.

Dividends

Orchid Island Capital pays an annual dividend of $1.32 per share and has a dividend yield of 18.6%. Ellington Residential Mortgage REIT pays an annual dividend of $1.48 per share and has a dividend yield of 13.8%. Orchid Island Capital pays out -231.6% of its earnings in the form of a dividend. Ellington Residential Mortgage REIT pays out 137.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

26.4% of Orchid Island Capital shares are held by institutional investors. Comparatively, 66.1% of Ellington Residential Mortgage REIT shares are held by institutional investors. 0.9% of Orchid Island Capital shares are held by company insiders. Comparatively, 2.7% of Ellington Residential Mortgage REIT shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Orchid Island Capital and Ellington Residential Mortgage REIT, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Orchid Island Capital 0 1 0 0 2.00
Ellington Residential Mortgage REIT 0 1 0 0 2.00

Ellington Residential Mortgage REIT has a consensus target price of $14.00, indicating a potential upside of 30.96%. Given Ellington Residential Mortgage REIT’s higher probable upside, analysts plainly believe Ellington Residential Mortgage REIT is more favorable than Orchid Island Capital.

Profitability

This table compares Orchid Island Capital and Ellington Residential Mortgage REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Orchid Island Capital N/A -1.10% -0.11%
Ellington Residential Mortgage REIT 40.44% 12.02% 1.17%

Summary

Ellington Residential Mortgage REIT beats Orchid Island Capital on 11 of the 14 factors compared between the two stocks.

About Orchid Island Capital

Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities (RMBS). The Company’s business objective is to provide attractive risk-adjusted total returns to its investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. Its portfolio consists of two categories of Agency RMBS: pass-through Agency RMBS and structured Agency RMBS. It invests in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. The mortgage loans underlying pass-through certificates are classified into three categories, including fixed-rate mortgages, adjustable-rate mortgages (ARMs) and Hybrid ARMs. It invests in structured Agency RMBS, which include collateralized mortgage obligations, interest only securities, inverse interest only securities and principal only securities.

About Ellington Residential Mortgage REIT

Ellington Residential Mortgage REIT is a real estate investment trust. The Company conducts its business through its subsidiaries, EARN OP GP LLC and Ellington Residential Mortgage LP (the Operating Partnership). It specializes in acquiring, investing in and managing residential mortgage- and real estate-related assets. It constructs and managing a portfolio consisting of residential mortgage-backed securities (RMBS) for which the principal and interest payments are guaranteed by the United States Government agency or the United States Government-sponsored entity (Agency RMBS) and, to a lesser extent, RMBS backed by prime jumbo, Alternative A-paper manufactured housing, and subprime residential mortgage loans (non-Agency RMBS). Its Agency RMBS include residential mortgage pass-through certificates, collateralized mortgage obligations (CMOs) and to-be-announced mortgage pass-through certificates (TBAs). Its non-agency RMBS include investment grade and non-investment grade classes.

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