Critical Review: Franklin BSP Realty Trust (NYSE:FBRT) versus Annaly Capital Management (NYSE:NLY)

Franklin BSP Realty Trust (NYSE:FBRT) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, profitability, valuation, dividends and institutional ownership.

Valuation and Earnings

This table compares Franklin BSP Realty Trust and Annaly Capital Management”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin BSP Realty Trust	$210.45 million	3.97	$95.88 million	$0.80	12.81
Annaly Capital Management	$4.84 billion	3.37	$1.00 billion	$2.16	11.04

Annaly Capital Management has higher revenue and earnings than Franklin BSP Realty Trust. Annaly Capital Management is trading at a lower price-to-earnings ratio than Franklin BSP Realty Trust, indicating that it is currently the more affordable of the two stocks.

Dividends

Franklin BSP Realty Trust pays an annual dividend of $1.42 per share and has a dividend yield of 13.9%. Annaly Capital Management pays an annual dividend of $2.80 per share and has a dividend yield of 11.7%. Franklin BSP Realty Trust pays out 177.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management pays out 129.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management has raised its dividend for 2 consecutive years.

Profitability

This table compares Franklin BSP Realty Trust and Annaly Capital Management’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin BSP Realty Trust	38.83%	8.86%	1.91%
Annaly Capital Management	26.68%	15.96%	1.71%

Analyst Recommendations

This is a breakdown of recent ratings for Franklin BSP Realty Trust and Annaly Capital Management, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin BSP Realty Trust	1	1	3	0	2.40
Annaly Capital Management	0	5	6	0	2.55

Franklin BSP Realty Trust currently has a consensus price target of $14.00, suggesting a potential upside of 36.59%. Annaly Capital Management has a consensus price target of $22.81, suggesting a potential downside of 4.35%. Given Franklin BSP Realty Trust’s higher probable upside, analysts clearly believe Franklin BSP Realty Trust is more favorable than Annaly Capital Management.

Institutional & Insider Ownership

59.9% of Franklin BSP Realty Trust shares are owned by institutional investors. Comparatively, 51.6% of Annaly Capital Management shares are owned by institutional investors. 1.4% of Franklin BSP Realty Trust shares are owned by company insiders. Comparatively, 0.2% of Annaly Capital Management shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Risk & Volatility

Franklin BSP Realty Trust has a beta of 0.99, meaning that its stock price is 1% less volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 1.25, meaning that its stock price is 25% more volatile than the S&P 500.

Summary

Annaly Capital Management beats Franklin BSP Realty Trust on 9 of the 17 factors compared between the two stocks.

About Franklin BSP Realty Trust

Benefit Street Partners operates as a self-managed real estate investment trust (REIT). BSP earns income from investing in a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the government-sponsored enterprises (GSEs)), or by an agency of the federal government, Government National Mortgage Association (Ginnie Mae). BSP’s investment strategy focuses on managing a portfolio of residential mortgage investments consisting almost exclusively of ARM Agency Securities. As of December 31, 2012, the Company’s securities consisted of Agency Securities classified as available-for-sale and Residential mortgage securities classified as held-to-maturity.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.