ARMOUR Residential REIT (NYSE:ARR – Get Free Report) and PennyMac Mortgage Investment Trust (NYSE:PMT – Get Free Report) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, dividends, valuation, institutional ownership, profitability, risk and analyst recommendations.
Insider and Institutional Ownership
54.2% of ARMOUR Residential REIT shares are owned by institutional investors. Comparatively, 67.4% of PennyMac Mortgage Investment Trust shares are owned by institutional investors. 0.4% of ARMOUR Residential REIT shares are owned by company insiders. Comparatively, 0.9% of PennyMac Mortgage Investment Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Analyst Ratings
This is a summary of recent recommendations and price targets for ARMOUR Residential REIT and PennyMac Mortgage Investment Trust, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| ARMOUR Residential REIT | 0 | 5 | 1 | 0 | 2.17 |
| PennyMac Mortgage Investment Trust | 0 | 5 | 1 | 0 | 2.17 |
Profitability
This table compares ARMOUR Residential REIT and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| ARMOUR Residential REIT | -4.55% | 15.89% | 1.64% |
| PennyMac Mortgage Investment Trust | 34.65% | 7.68% | 0.71% |
Valuation & Earnings
This table compares ARMOUR Residential REIT and PennyMac Mortgage Investment Trust”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| ARMOUR Residential REIT | -$21.36 million | -67.33 | -$14.39 million | ($0.24) | -65.44 |
| PennyMac Mortgage Investment Trust | $334.19 million | 3.24 | $160.98 million | $0.72 | 17.30 |
PennyMac Mortgage Investment Trust has higher revenue and earnings than ARMOUR Residential REIT. ARMOUR Residential REIT is trading at a lower price-to-earnings ratio than PennyMac Mortgage Investment Trust, indicating that it is currently the more affordable of the two stocks.
Dividends
ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 18.3%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.60 per share and has a dividend yield of 12.8%. ARMOUR Residential REIT pays out -1,200.0% of its earnings in the form of a dividend. PennyMac Mortgage Investment Trust pays out 222.2% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.
Volatility and Risk
ARMOUR Residential REIT has a beta of 1.39, meaning that its stock price is 39% more volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 1.3, meaning that its stock price is 30% more volatile than the S&P 500.
Summary
PennyMac Mortgage Investment Trust beats ARMOUR Residential REIT on 9 of the 14 factors compared between the two stocks.
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.
About PennyMac Mortgage Investment Trust
PennyMac Mortgage Investment Trust, through its subsidiary, primarily invests in mortgage-related assets in the United States. The company operates through: Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production segments. Its Credit Sensitive Strategies segment invests in credit risk transfer (CRT) agreements, CRT securities, subordinate mortgage-backed securities (MBS), distressed loans, and real estate. The company's Interest Rate Sensitive Strategies segment engages in investing in mortgage servicing rights, excess servicing spreads, and agency and senior non-agency MBS, as well as related interest rate hedging activities. Its Correspondent Production segment is involved in purchasing, pooling, and reselling newly originated prime credit residential loans directly or in the form of MBS. The company primarily sells its loans to government-sponsored entities or PennyMac Loan Services, LLC. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its shareholders. The company was incorporated in 2009 and is headquartered in Westlake Village, California.
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