NexPoint Real Estate Finance (NYSE:NREF) & Two Harbors Investments (NYSE:TWO) Head-To-Head Contrast

Two Harbors Investments (NYSE:TWO) and NexPoint Real Estate Finance (NYSE:NREF) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, profitability, risk, analyst recommendations, valuation, earnings and institutional ownership.

Insider and Institutional Ownership

64.2% of Two Harbors Investments shares are owned by institutional investors. Comparatively, 67.8% of NexPoint Real Estate Finance shares are owned by institutional investors. 0.7% of Two Harbors Investments shares are owned by insiders. Comparatively, 55.7% of NexPoint Real Estate Finance shares are owned by 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.

Volatility and Risk

Two Harbors Investments has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500. Comparatively, NexPoint Real Estate Finance has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500.

Dividends

Two Harbors Investments pays an annual dividend of $1.36 per share and has a dividend yield of 12.6%. NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 15.3%. Two Harbors Investments pays out -27.8% of its earnings in the form of a dividend. NexPoint Real Estate Finance pays out 69.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Two Harbors Investments has increased its dividend for 1 consecutive years.

Profitability

This table compares Two Harbors Investments and NexPoint Real Estate Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investments	-109.90%	12.00%	1.29%
NexPoint Real Estate Finance	122.60%	15.63%	1.04%

Analyst Ratings

This is a breakdown of current ratings for Two Harbors Investments and NexPoint Real Estate Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investments	2	6	0	0	1.75
NexPoint Real Estate Finance	1	3	0	0	1.75

Two Harbors Investments currently has a consensus price target of $12.88, suggesting a potential upside of 19.35%. NexPoint Real Estate Finance has a consensus price target of $14.50, suggesting a potential upside of 10.73%. Given Two Harbors Investments’ higher probable upside, analysts plainly believe Two Harbors Investments is more favorable than NexPoint Real Estate Finance.

Earnings & Valuation

This table compares Two Harbors Investments and NexPoint Real Estate Finance”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investments	$115.06 million	9.85	-$454.30 million	($4.89)	-2.21
NexPoint Real Estate Finance	$89.95 million	2.58	$110.28 million	$2.90	4.52

NexPoint Real Estate Finance has lower revenue, but higher earnings than Two Harbors Investments. Two Harbors Investments is trading at a lower price-to-earnings ratio than NexPoint Real Estate Finance, indicating that it is currently the more affordable of the two stocks.

Summary

NexPoint Real Estate Finance beats Two Harbors Investments on 8 of the 14 factors compared between the two stocks.

About Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About NexPoint Real Estate Finance

NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.