Head-To-Head Analysis: ARMOUR Residential REIT (NYSE:ARR) and Franklin BSP Realty Trust (NYSE:FBRT)

ARMOUR Residential REIT (NYSE:ARR) and Franklin BSP Realty Trust (NYSE:FBRT) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Risk and Volatility

ARMOUR Residential REIT has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500. Comparatively, Franklin BSP Realty Trust has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500.

Institutional and Insider Ownership

54.2% of ARMOUR Residential REIT shares are owned by institutional investors. Comparatively, 59.9% of Franklin BSP Realty Trust shares are owned by institutional investors. 0.2% of ARMOUR Residential REIT shares are owned by insiders. Comparatively, 1.4% of Franklin BSP Realty Trust shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 16.3%. Franklin BSP Realty Trust pays an annual dividend of $0.80 per share and has a dividend yield of 9.2%. ARMOUR Residential REIT pays out 105.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin BSP Realty Trust pays out 125.0% 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.

Analyst Recommendations

This is a summary of current ratings and recommmendations for ARMOUR Residential REIT and Franklin BSP Realty Trust, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARMOUR Residential REIT	1	2	3	0	2.33
Franklin BSP Realty Trust	0	2	2	0	2.50

ARMOUR Residential REIT presently has a consensus target price of $18.17, suggesting a potential upside of 2.78%. Franklin BSP Realty Trust has a consensus target price of $13.50, suggesting a potential upside of 55.66%. Given Franklin BSP Realty Trust’s stronger consensus rating and higher possible upside, analysts clearly believe Franklin BSP Realty Trust is more favorable than ARMOUR Residential REIT.

Profitability

This table compares ARMOUR Residential REIT and Franklin BSP Realty Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARMOUR Residential REIT	40.31%	15.30%	1.65%
Franklin BSP Realty Trust	31.03%	7.22%	1.55%

Valuation and Earnings

This table compares ARMOUR Residential REIT and Franklin BSP Realty Trust”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARMOUR Residential REIT	$800.42 million	2.71	$322.69 million	$2.73	6.47
Franklin BSP Realty Trust	$270.07 million	2.60	$82.27 million	$0.64	13.55

ARMOUR Residential REIT has higher revenue and earnings than Franklin BSP Realty Trust. ARMOUR Residential REIT 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.

Summary

ARMOUR Residential REIT beats Franklin BSP Realty Trust on 11 of the 16 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 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.