Head-To-Head Review: Two Harbors Investments (NYSE:TWO) vs. MFA Financial (NYSE:MFA)

MFA Financial (NYSE:MFA) and Two Harbors Investments (NYSE:TWO) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Earnings and Valuation

This table compares MFA Financial and Two Harbors Investments”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFA Financial	$745.06 million	1.35	$176.78 million	$1.29	7.63
Two Harbors Investments	$115.06 million	10.35	-$454.30 million	($4.89)	-2.32

MFA Financial has higher revenue and earnings than Two Harbors Investments. Two Harbors Investments is trading at a lower price-to-earnings ratio than MFA Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

MFA Financial pays an annual dividend of $1.44 per share and has a dividend yield of 14.6%. Two Harbors Investments pays an annual dividend of $1.36 per share and has a dividend yield of 12.0%. MFA Financial pays out 111.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments pays out -27.8% of its earnings in the form of a dividend. MFA Financial has raised its dividend for 1 consecutive years and Two Harbors Investments has raised its dividend for 1 consecutive years.

Risk & Volatility

MFA Financial has a beta of 1.57, suggesting that its stock price is 57% more volatile than the S&P 500. Comparatively, Two Harbors Investments has a beta of 1.18, suggesting that its stock price is 18% more volatile than the S&P 500.

Institutional and Insider Ownership

65.3% of MFA Financial shares are owned by institutional investors. Comparatively, 64.2% of Two Harbors Investments shares are owned by institutional investors. 0.8% of MFA Financial shares are owned by company insiders. Comparatively, 0.7% of Two Harbors Investments shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares MFA Financial and Two Harbors Investments’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFA Financial	23.73%	6.67%	1.01%
Two Harbors Investments	-109.90%	12.00%	1.29%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for MFA Financial and Two Harbors Investments, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFA Financial	0	4	2	0	2.33
Two Harbors Investments	2	6	0	0	1.75

MFA Financial presently has a consensus target price of $10.81, suggesting a potential upside of 9.83%. Two Harbors Investments has a consensus target price of $12.88, suggesting a potential upside of 13.59%. Given Two Harbors Investments’ higher possible upside, analysts plainly believe Two Harbors Investments is more favorable than MFA Financial.

Summary

MFA Financial beats Two Harbors Investments on 11 of the 16 factors compared between the two stocks.

About MFA Financial

MFA Financial, Inc., together with its subsidiaries, operates as a real estate investment trust in the United States. It invests in residential mortgage securities, including non-agency mortgage-backed securities, agency MBS, and credit risk transfer securities; residential whole loans, including purchased performing loans, purchased credit deteriorated, and non-performing loans; and mortgage servicing rights related assets. The company was incorporated in 1997 and is based in New York, New York.

About Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.