Reviewing ARMOUR Residential REIT (NYSE:ARR) and KKR Real Estate Finance Trust (NYSE:KREF)

KKR Real Estate Finance Trust (NYSE:KREF) and ARMOUR Residential REIT (NYSE:ARR) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Valuation and Earnings

This table compares KKR Real Estate Finance Trust and ARMOUR Residential REIT”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
KKR Real Estate Finance Trust	$564.63 million	1.10	$35.59 million	($0.66)	-14.39
ARMOUR Residential REIT	-$21.36 million	-61.03	-$14.39 million	($0.24)	-59.31

KKR Real Estate Finance Trust has higher revenue and earnings than ARMOUR Residential REIT. ARMOUR Residential REIT is trading at a lower price-to-earnings ratio than KKR Real Estate Finance Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and recommmendations for KKR Real Estate Finance Trust and ARMOUR Residential REIT, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
KKR Real Estate Finance Trust	0	1	3	0	2.75
ARMOUR Residential REIT	0	5	1	0	2.17

KKR Real Estate Finance Trust presently has a consensus price target of $11.44, indicating a potential upside of 20.46%. ARMOUR Residential REIT has a consensus price target of $15.50, indicating a potential upside of 8.89%. Given KKR Real Estate Finance Trust’s stronger consensus rating and higher possible upside, analysts clearly believe KKR Real Estate Finance Trust is more favorable than ARMOUR Residential REIT.

Volatility & Risk

KKR Real Estate Finance Trust has a beta of 0.91, suggesting that its stock price is 9% less 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.

Insider & Institutional Ownership

70.2% of KKR Real Estate Finance Trust shares are owned by institutional investors. Comparatively, 54.2% of ARMOUR Residential REIT shares are owned by institutional investors. 1.9% of KKR Real Estate Finance Trust shares are owned by company insiders. Comparatively, 0.2% of ARMOUR Residential REIT shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

KKR Real Estate Finance Trust pays an annual dividend of $1.00 per share and has a dividend yield of 10.5%. ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 20.2%. KKR Real Estate Finance Trust pays out -151.5% of its earnings in the form of a dividend. ARMOUR Residential REIT pays out -1,200.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. ARMOUR Residential REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares KKR Real Estate Finance Trust and ARMOUR Residential REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
KKR Real Estate Finance Trust	-4.43%	1.61%	0.33%
ARMOUR Residential REIT	-4.55%	15.89%	1.64%

Summary

KKR Real Estate Finance Trust beats ARMOUR Residential REIT on 10 of the 16 factors compared between the two stocks.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc., a mortgage real estate investment trust, focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets. It engages in the origination and purchase of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans. The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. KKR Real Estate Finance Trust Inc. was incorporated in 2014 and is headquartered in New York, New York.

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.