Reviewing Ready Capital (NYSE:RC) and Orchid Island Capital (NYSE:ORC)

Ready Capital (NYSE:RC) and Orchid Island Capital (NYSE:ORC) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, earnings, valuation and dividends.

Earnings & Valuation

This table compares Ready Capital and Orchid Island Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ready Capital	$569.17 million	0.59	-$228.91 million	($1.47)	-1.39
Orchid Island Capital	$414.00 million	3.37	$159.03 million	$0.75	9.27

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

Volatility and Risk

Ready Capital has a beta of 1.47, indicating that its share price is 47% more volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 1.57, indicating that its share price is 57% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Ready Capital and Orchid Island Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ready Capital	2	4	0	0	1.67
Orchid Island Capital	1	1	0	0	1.50

Ready Capital presently has a consensus price target of $2.81, indicating a potential upside of 37.53%. Orchid Island Capital has a consensus price target of $7.50, indicating a potential upside of 7.84%. Given Ready Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Ready Capital is more favorable than Orchid Island Capital.

Profitability

This table compares Ready Capital and Orchid Island Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ready Capital	-39.55%	-10.29%	-2.05%
Orchid Island Capital	N/A	10.24%	1.19%

Institutional and Insider Ownership

55.9% of Ready Capital shares are held by institutional investors. Comparatively, 32.7% of Orchid Island Capital shares are held by institutional investors. 1.1% of Ready Capital shares are held by insiders. Comparatively, 0.4% of Orchid Island Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Ready Capital pays an annual dividend of $0.04 per share and has a dividend yield of 2.0%. Orchid Island Capital pays an annual dividend of $1.20 per share and has a dividend yield of 17.3%. Ready Capital pays out -2.7% of its earnings in the form of a dividend. Orchid Island Capital pays out 160.0% 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 has raised its dividend for 1 consecutive years. Orchid Island Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Orchid Island Capital beats Ready Capital on 10 of the 16 factors compared between the two stocks.

About Ready Capital

Ready Capital Corporation operates as a real estate finance company in the United States. It operates through two segments: LMM Commercial Real Estate and Small Business Lending. The company originates, acquires, finances, and services lower-to-middle-market (LLM) commercial real estate loans, small business administration (SBA) loans, residential mortgage loans, construction loans, and mortgage-backed securities collateralized primarily by LLM loans, or other real estate-related investments. The LMM Commercial Real Estate segment originates LLM loans across the full life-cycle of an LLM property, including construction, bridge, stabilized, and agency loan origination channels. The Small Business Lending segment acquires, originates, and services owner-occupied loans guaranteed by the SBA under its SBA Section 7(a) Program; and acquires purchased future receivables. 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. The company was formerly known as Sutherland Asset Management Corporation and changed its name to Ready Capital Corporation in September 2018. Ready Capital Corporation was founded in 2007 and is headquartered in New York, New York.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.