Ready Capital (NYSE:RC – Get Free Report) and Ellington Financial (NYSE:EFC – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, earnings, dividends, analyst recommendations, risk, valuation and institutional ownership.
Dividends
Ready Capital pays an annual dividend of $0.50 per share and has a dividend yield of 11.7%. Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.4%. Ready Capital pays out -27.0% of its earnings in the form of a dividend. Ellington Financial pays out 125.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ready Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings & Valuation
This table compares Ready Capital and Ellington Financial”s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ready Capital | $896.97 million | 0.78 | -$435.76 million | ($1.85) | -2.31 |
| Ellington Financial | $136.41 million | 9.99 | $145.86 million | $1.24 | 11.00 |
Ellington Financial has lower revenue, but higher earnings than Ready Capital. Ready Capital is trading at a lower price-to-earnings ratio than Ellington Financial, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Ready Capital has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.
Analyst Recommendations
This is a breakdown of current recommendations and price targets for Ready Capital and Ellington Financial, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ready Capital | 1 | 5 | 1 | 0 | 2.00 |
| Ellington Financial | 0 | 1 | 5 | 1 | 3.00 |
Ready Capital currently has a consensus price target of $5.88, suggesting a potential upside of 37.33%. Ellington Financial has a consensus price target of $14.29, suggesting a potential upside of 4.74%. Given Ready Capital’s higher probable upside, equities research analysts plainly believe Ready Capital is more favorable than Ellington Financial.
Insider and Institutional Ownership
55.9% of Ready Capital shares are owned by institutional investors. Comparatively, 55.6% of Ellington Financial shares are owned by institutional investors. 1.1% of Ready Capital shares are owned by insiders. Comparatively, 4.1% of Ellington Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Profitability
This table compares Ready Capital and Ellington Financial’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ready Capital | -40.59% | 3.76% | 0.72% |
| Ellington Financial | 89.52% | 13.56% | 1.07% |
Summary
Ellington Financial beats Ready Capital on 11 of the 17 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 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.
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