Orchid Island Capital (NYSE:ORC) vs. Chimera Investment (NYSE:CIM) Critical Review

Chimera Investment (NYSE:CIM) and Orchid Island Capital (NYSE:ORC) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, risk, institutional ownership, analyst recommendations, earnings, profitability and dividends.

Volatility & Risk

Chimera Investment has a beta of 1.84, indicating that its share price is 84% more volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 1.68, indicating that its share price is 68% more volatile than the S&P 500.

Valuation and Earnings

This table compares Chimera Investment and Orchid Island Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chimera Investment	$760.95 million	1.35	$176.07 million	($0.40)	-30.78
Orchid Island Capital	$241.58 million	5.68	$159.03 million	$1.04	7.20

Chimera Investment has higher revenue and earnings than Orchid Island Capital. Chimera Investment is trading at a lower price-to-earnings ratio than Orchid Island Capital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Chimera Investment and Orchid Island Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chimera Investment	4.27%	7.36%	1.36%
Orchid Island Capital	N/A	9.23%	1.10%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Chimera Investment and Orchid Island Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chimera Investment	1	2	1	0	2.00
Orchid Island Capital	1	2	0	0	1.67

Chimera Investment presently has a consensus price target of $14.50, suggesting a potential upside of 17.79%. Orchid Island Capital has a consensus price target of $7.50, suggesting a potential upside of 0.13%. Given Chimera Investment’s stronger consensus rating and higher probable upside, analysts plainly believe Chimera Investment is more favorable than Orchid Island Capital.

Dividends

Chimera Investment pays an annual dividend of $1.48 per share and has a dividend yield of 12.0%. Orchid Island Capital pays an annual dividend of $1.44 per share and has a dividend yield of 19.2%. Chimera Investment pays out -370.0% of its earnings in the form of a dividend. Orchid Island Capital pays out 138.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chimera Investment has raised its dividend for 1 consecutive years and Orchid Island Capital has raised its dividend for 1 consecutive years.

Insider & Institutional Ownership

48.4% of Chimera Investment shares are held by institutional investors. Comparatively, 32.7% of Orchid Island Capital shares are held by institutional investors. 1.5% of Chimera Investment shares are held by insiders. Comparatively, 0.4% of Orchid Island Capital shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Chimera Investment beats Orchid Island Capital on 11 of the 16 factors compared between the two stocks.

About Chimera Investment

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries, invests in a portfolio of mortgage assets, including residential mortgage loans, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, agency mortgage-backed securities secured by pools of commercial mortgage loans, business purpose and investor loans, and other real estate related securities. It invests in investment grade, non-investment grade, and non-rated classes. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Chimera Investment Corporation was incorporated in 2007 and is headquartered in New York, New York.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.