Critical Survey: MFA Financial (NYSE:MFA) versus Chimera Investment (NYSE:CIM)

MFA Financial (NYSE:MFA) and Chimera Investment (NYSE:CIM) are both small-cap 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.

Earnings and Valuation

This table compares MFA Financial and Chimera Investment”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFA Financial	$229.72 million	5.41	$80.16 million	$0.58	21.00
Chimera Investment	$772.90 million	1.56	$126.10 million	$1.70	8.81

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

Institutional & Insider Ownership

65.3% of MFA Financial shares are owned by institutional investors. Comparatively, 48.4% of Chimera Investment shares are owned by institutional investors. 0.7% of MFA Financial shares are owned by company insiders. Comparatively, 0.9% of Chimera Investment 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.

Analyst Recommendations

This is a breakdown of recent ratings for MFA Financial and Chimera Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFA Financial	0	1	4	0	2.80
Chimera Investment	0	2	0	0	2.00

MFA Financial currently has a consensus price target of $13.40, suggesting a potential upside of 10.02%. Chimera Investment has a consensus price target of $16.25, suggesting a potential upside of 8.44%. Given MFA Financial’s stronger consensus rating and higher probable upside, analysts clearly believe MFA Financial is more favorable than Chimera Investment.

Risk & Volatility

MFA Financial has a beta of 2.16, meaning that its stock price is 116% more volatile than the S&P 500. Comparatively, Chimera Investment has a beta of 1.73, meaning that its stock price is 73% more volatile than the S&P 500.

Dividends

MFA Financial pays an annual dividend of $1.40 per share and has a dividend yield of 11.5%. Chimera Investment pays an annual dividend of $1.48 per share and has a dividend yield of 9.9%. MFA Financial pays out 241.4% 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 pays out 87.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares MFA Financial and Chimera Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFA Financial	14.22%	10.02%	1.76%
Chimera Investment	28.79%	7.66%	1.54%

Summary

MFA Financial beats Chimera Investment on 10 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 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.