Head-To-Head Analysis: MFA Financial (NYSE:MFA) vs. Two Harbors Investments (NYSE:TWO)

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

Risk & Volatility

Two Harbors Investments has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500. Comparatively, MFA Financial has a beta of 1.57, indicating that its stock price is 57% more volatile than the S&P 500.

Insider and Institutional Ownership

64.2% of Two Harbors Investments shares are owned by institutional investors. Comparatively, 65.3% of MFA Financial shares are owned by institutional investors. 0.7% of Two Harbors Investments shares are owned by insiders. Comparatively, 0.8% of MFA Financial 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.

Dividends

Two Harbors Investments pays an annual dividend of $1.36 per share and has a dividend yield of 12.6%. MFA Financial pays an annual dividend of $1.44 per share and has a dividend yield of 15.2%. Two Harbors Investments pays out -27.8% of its earnings in the form of a dividend. MFA Financial pays out 111.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments has increased its dividend for 1 consecutive years and MFA Financial has increased its dividend for 1 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Two Harbors Investments and MFA Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investments	2	6	0	0	1.75
MFA Financial	0	4	2	0	2.33

Two Harbors Investments presently has a consensus price target of $12.88, suggesting a potential upside of 19.71%. MFA Financial has a consensus price target of $10.81, suggesting a potential upside of 13.95%. Given Two Harbors Investments’ higher possible upside, research analysts plainly believe Two Harbors Investments is more favorable than MFA Financial.

Profitability

This table compares Two Harbors Investments and MFA Financial’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%
MFA Financial	23.73%	6.67%	1.01%

Earnings & Valuation

This table compares Two Harbors Investments and MFA Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investments	$412.00 million	2.74	-$454.30 million	($4.89)	-2.20
MFA Financial	$745.06 million	1.30	$176.78 million	$1.29	7.36

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

Summary

MFA Financial beats Two Harbors Investments on 11 of the 16 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 MFA Financial

MFA Financial, Inc., together with its subsidiaries, operates as a real estate investment trust in the United States. It invests in residential mortgage securities, including non-agency mortgage-backed securities, agency MBS, and credit risk transfer securities; residential whole loans, including purchased performing loans, purchased credit deteriorated, and non-performing loans; and mortgage servicing rights related assets. The company was incorporated in 1997 and is based in New York, New York.