Comparing Dynex Capital (NYSE:DX) and ARMOUR Residential REIT (NYSE:ARR)

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

Analyst Ratings

This is a summary of current recommendations for Dynex Capital and ARMOUR Residential REIT, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Dynex Capital	0	3	2	0	2.40
ARMOUR Residential REIT	1	6	1	0	2.00

Dynex Capital presently has a consensus price target of $13.42, indicating a potential upside of 1.04%. ARMOUR Residential REIT has a consensus price target of $16.00, indicating a potential upside of 1.94%. Given ARMOUR Residential REIT’s higher possible upside, analysts plainly believe ARMOUR Residential REIT is more favorable than Dynex Capital.

Dividends

Dynex Capital pays an annual dividend of $2.04 per share and has a dividend yield of 15.4%. ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 18.3%. Dynex Capital pays out 261.5% 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. Dynex Capital has raised its dividend for 5 consecutive years. ARMOUR Residential REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

38.3% of Dynex Capital shares are owned by institutional investors. Comparatively, 54.2% of ARMOUR Residential REIT shares are owned by institutional investors. 1.0% of Dynex Capital shares are owned by insiders. Comparatively, 0.2% of ARMOUR Residential REIT shares are owned by 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Dynex Capital	41.53%	7.37%	1.00%
ARMOUR Residential REIT	-4.55%	15.89%	1.64%

Risk and Volatility

Dynex Capital has a beta of 0.92, indicating that its share price is 8% less volatile than the S&P 500. Comparatively, ARMOUR Residential REIT has a beta of 1.41, indicating that its share price is 41% more volatile than the S&P 500.

Valuation and Earnings

This table compares Dynex Capital 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
Dynex Capital	$319.53 million	5.40	$113.90 million	$0.78	17.02
ARMOUR Residential REIT	$550.95 million	2.61	-$14.39 million	($0.24)	-65.40

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

Summary

Dynex Capital beats ARMOUR Residential REIT on 9 of the 17 factors compared between the two stocks.

About Dynex Capital

Dynex Capital, Inc., a mortgage real estate investment trust, invests in mortgage-backed securities (MBS) on a leveraged basis in the United States. It invests in agency and non-agency MBS consisting of residential MBS, commercial MBS (CMBS), and CMBS interest-only securities. Agency MBS have a guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity, such as Fannie Mae and Freddie Mac. Non-Agency MBS have no such guaranty of payment. The company has qualified as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders as dividends. Dynex Capital, Inc. was incorporated in 1987 and is headquartered in Glen Allen, Virginia.

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.