Annaly Capital Management (NYSE:NLY) and Ellington Financial (NYSE:EFC) Head-To-Head Review

Ellington Financial (NYSE:EFC) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, profitability, earnings, dividends, institutional ownership, analyst recommendations and valuation.

Volatility & Risk

Ellington Financial has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500.

Valuation & Earnings

This table compares Ellington Financial and Annaly Capital Management”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$189.96 million	8.91	$146.87 million	$1.66	8.13
Annaly Capital Management	$5.96 billion	2.64	$2.03 billion	$2.96	7.25

Annaly Capital Management has higher revenue and earnings than Ellington Financial. Annaly Capital Management is trading at a lower price-to-earnings ratio than Ellington Financial, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

55.6% of Ellington Financial shares are held by institutional investors. Comparatively, 51.6% of Annaly Capital Management shares are held by institutional investors. 3.2% of Ellington Financial shares are held by company insiders. Comparatively, 0.2% of Annaly Capital Management 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.

Profitability

This table compares Ellington Financial and Annaly Capital Management’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Financial	72.08%	15.81%	1.29%
Annaly Capital Management	34.33%	15.92%	1.68%

Dividends

Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.6%. Annaly Capital Management pays an annual dividend of $2.80 per share and has a dividend yield of 13.1%. Ellington Financial pays out 94.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management has raised its dividend for 2 consecutive years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings for Ellington Financial and Annaly Capital Management, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	2	2	1	2.80
Annaly Capital Management	0	4	7	1	2.75

Ellington Financial currently has a consensus price target of $14.08, suggesting a potential upside of 4.31%. Annaly Capital Management has a consensus price target of $24.22, suggesting a potential upside of 12.90%. Given Annaly Capital Management’s higher possible upside, analysts plainly believe Annaly Capital Management is more favorable than Ellington Financial.

Summary

Annaly Capital Management beats Ellington Financial on 11 of the 17 factors compared between the two stocks.

About Ellington Financial

Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Ellington Financial LLC was incorporated in 2007 and is headquartered in Old Greenwich, Connecticut.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.