Which Mortgage REIT is the Best Choice?

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As profitable investors seek to invest in high dividend yield mortgage REITs in a near-zero interest rate environment, both Annaly Capital Management (NLY) and Granite Point (GPMT) could gain significant attention. But which of these stocks is better to buy now? Read more to find out.

Real Estate Mortgage Investment Fund (REIT) Annaly Capital Management, Inc. (NLY) invests in various types of mortgage-backed agency securities, non-agency residential mortgage assets, and residential mortgages. For comparison: Granite Point Mortgage Trust Inc. (GPMT) is an internally managed real estate finance company. He creates, invests in, and manages floating rate commercial mortgages and other debt and debt-like investments in commercial real estate in the United States.

At almost zero key interest rates, investor interest in mortgage REITs is growing because they distribute most of their profits in dividends. In addition, mortgage REITs are expected to become even more attractive as US Treasury yields fell yesterday amid poor consumer sentiment. The University of Michigan consumer sentiment index fell to 70.2 in August, according to a CNBC report. lowest level since 2011… As a result, NLY and GPMT may see increased investor attention in the near future.

NLY is up 14.5% over the past year and GPMT is up 78.8%. In addition, GPMT’s profit is 50.3% over the past nine months, well above NLY’s 11.2%. And in terms of results over the past six months, GPMT is the clear winner with 25.1% gains compared to NLY’s 0.6% yield.

But which of these two stocks is better to buy now? Let’s find out.

Latest developments

In accordance with the terms of the cumulative repurchase of NLY Series F preferred shares at a fixed or floating rate of 6.95%, the Board of Directors announced, inter alia, a dividend of $ 0.43 per share of Series F preferred shares. Dividends paid 30 September.

In addition, on March 26, 2021, NLY announced its agreement to sell its commercial real estate business to Slate Asset Management LP, an international real estate investment and asset management firm.

On July 29, GPMT paid a quarterly dividend of $ 0.25 per share. The annual dividend of $ 0.90 equals 6.71% dividend yield. He has been paying out dividends consistently for the past three years.

On May 15, GPMT announced the closure of GPMT 2021-FL3, a $ 824 million secured commercial real estate loan, as part of a private offering to qualified institutional buyers.

Latest financial results

NLY’s net interest income declined 19% year-on-year to $ 322.86 million in the second fiscal quarter ended June 30, 2021. The company’s net loss for the quarter was US $ 294.85 million compared to US $ 856.23 million in the prior quarter. -year quarter. Loss per share was $ 0.23, compared with $ 0.58 per share a year earlier.

In the second quarter ended June 30, 2021, GPMT’s net interest income decreased 33.7% year-on-year to $ 22.78 million. The company’s net income was $ 14.27 million, compared with a loss of $ 1.73 million a year earlier. Its earnings per share were $ 0.24, compared with a loss of $ 0.03 per share in the previous quarter.

Past and expected financial results

Over the past three years, NLY’s revenue has grown by 3.1% per year. However, the company’s revenue is expected to decline 0.8% this year and 2.4% next year. EPS is expected to decline 0.9% in fiscal 2021 and 5.4% in fiscal 2022. In addition, earnings per share are expected to decline 3.3% per annum over the next five years.

In comparison, GPMT’s revenue has grown 17% annually over the past three years. Analysts expect the company’s revenue to decline 17.1% in fiscal 2021 and 1.8% in fiscal 2022. However, earnings per share are expected to grow 8.5% this year and 2.4% next year. GPMT’s earnings per share are expected to grow at a rate of 2.1% per annum over the next five years.

Profitability

NLY’s 12-month revenue is $ 3.79 billion, higher than GPMT’s $ 135.50 million. And NLY is slightly more profitable with 100% gross margin compared to 96.76% GPMT.

In addition, NLY’s ROE and ROE are 24.42% and 3.81%, while the GPMT ratios are 4.26% and 0.99%.

Grade

Under trailing conditions – 12 months P / SGPMT is currently trading at 5.45x, higher than 3.20x NLY. However, the moving 12-month P / B NLY of 1.03x is 32.1% higher than GPMT’s 0.78x.

POWR ratings

NLY has an overall rating of C, which is neutral in our own POWR ratings system. In contrast, GPMT has an overall rating of B, which means buy. POWR ratings are calculated taking into account 118 different factors, each of which is weighted to the best degree.

Both NLY and GPMT have a quality rating of B. This is justified in terms of their non-GAAP dividend payout ratios for the last 12 months. 72.73% NLY and 70.87% GPMT are higher than the industry average of 28.75%.

NLY is rated F for growth, in line with analysts’ expectations that its EPS will decline in the coming quarters. On the other hand, GPMT has a C for growth, which is in line with analysts’ expectations that its revenues will decline in the near future, but its earnings per share will rise.

Out of 30 REITs – Mortgages industry stocks, NLY ranked 15th and GPMT ranked 2nd.

In addition to what I said above, we also evaluated both stocks in terms of dynamics, stability, sentiment and value. Click here to view all NLY ratings. Also get all GPMT ratings here

Winner

Mortgage REIT NLY and GPMT may see increased investor attention in the coming months as high-income investors seek to capitalize on high dividend yields at a time when Treasury yields are falling. Against this background, we consider it appropriate wait for the best entry point to NLY and instead bet on GPMT now for its superior financial performance and better growth prospects.

Our research shows that the chances of success increase when you invest in stocks with an overall rating of Strong Buy or Buy. View All Top Rated Stocks in REIT – Mortgage Industry here

GPMT shares traded at $ 13.25 a share on Tuesday morning, down $ 0.16 (-1.19%). From the beginning of the year to date, the GPMT is up 37.64%, compared with a 19.51% rise in the benchmark S&P 500 over the same period.

About the author: Manisha Chatterjee

From a young age, Manisha showed a great interest in the stock market. She studied economics in college. and has a passion for writing, which led her to a career as a research analyst.

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Message Annaly Capital Management vs Granite Point: Which Mortgage REIT is Better? first appeared on StockNews.com

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