Reviewing ARMOUR Residential REIT (NYSE:ARR) & Ellington Credit (NYSE:EARN)

Ellington Credit (NYSE:EARN) and ARMOUR Residential REIT (NYSE:ARR) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Dividends

Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 17.0%. ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 19.0%. Ellington Credit pays out 533.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. ARMOUR Residential REIT pays out -1,200.0% of its earnings in the form of a dividend. ARMOUR Residential REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Ellington Credit and ARMOUR Residential REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Credit	19.24%	15.90%	3.89%
ARMOUR Residential REIT	-4.55%	15.89%	1.64%

Insider & Institutional Ownership

20.4% of Ellington Credit shares are held by institutional investors. Comparatively, 54.2% of ARMOUR Residential REIT shares are held by institutional investors. 1.4% of Ellington Credit shares are held by insiders. Comparatively, 0.2% of ARMOUR Residential REIT shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Ellington Credit has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500. Comparatively, ARMOUR Residential REIT has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Ellington Credit and ARMOUR Residential REIT, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Credit	0	1	1	0	2.50
ARMOUR Residential REIT	0	5	1	0	2.17

Ellington Credit currently has a consensus price target of $6.13, indicating a potential upside of 8.77%. ARMOUR Residential REIT has a consensus price target of $16.00, indicating a potential upside of 5.46%. Given Ellington Credit’s stronger consensus rating and higher probable upside, research analysts clearly believe Ellington Credit is more favorable than ARMOUR Residential REIT.

Earnings & Valuation

This table compares Ellington Credit and ARMOUR Residential REIT”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Credit	$15.07 million	14.03	$6.59 million	$0.18	31.28
ARMOUR Residential REIT	$550.95 million	2.52	-$14.39 million	($0.24)	-63.22

Ellington Credit has higher earnings, but lower revenue than ARMOUR Residential REIT. ARMOUR Residential REIT is trading at a lower price-to-earnings ratio than Ellington Credit, indicating that it is currently the more affordable of the two stocks.

Summary

Ellington Credit beats ARMOUR Residential REIT on 10 of the 15 factors compared between the two stocks.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based in Old Greenwich, Connecticut.

About ARMOUR Residential REIT

ARMOUR Residential REIT, Inc. invests in residential mortgage-backed securities (MBS) in the United States. Its securities portfolio primarily consists of the United States Government-sponsored entity's (GSE) and the Government National Mortgage Administration's issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans; and unsecured notes and bonds issued by the GSE and the United States treasuries, as well as money market instruments. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. ARMOUR Residential REIT, Inc. was incorporated in 2008 and is based in Vero Beach, Florida.