Head to Head Analysis: Hatteras Financial Corp. (HTS) & Orchid Island Capital (ORC)

Hatteras Financial Corp. (NYSE: HTS) and Orchid Island Capital (NYSE:ORC) are both financials companies, but which is the better stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, profitability, risk, dividends and earnings.

Profitability

This table compares Hatteras Financial Corp. and Orchid Island Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hatteras Financial Corp. N/A -16.93% -1.89%
Orchid Island Capital N/A -3.33% -0.35%

Volatility & Risk

Hatteras Financial Corp. has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 0.5, indicating that its share price is 50% less volatile than the S&P 500.

Dividends

Hatteras Financial Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 11.0%. Orchid Island Capital pays an annual dividend of $1.68 per share and has a dividend yield of 17.4%. Hatteras Financial Corp. pays out 580.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital pays out -2,799.5% of its earnings in the form of a dividend. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

23.6% of Orchid Island Capital shares are owned by institutional investors. 0.9% of Orchid Island Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Hatteras Financial Corp. and Orchid Island Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Hatteras Financial Corp. N/A N/A N/A $0.31 52.55
Orchid Island Capital $2.97 million 147.50 -$2.72 million ($0.06) -161.14

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Hatteras Financial Corp. and Orchid Island Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hatteras Financial Corp. 0 0 0 0 N/A
Orchid Island Capital 0 1 0 0 2.00

Summary

Orchid Island Capital beats Hatteras Financial Corp. on 8 of the 9 factors compared between the two stocks.

About Hatteras Financial Corp.

Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.

About Orchid Island Capital

Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities (RMBS). The Company’s business objective is to provide attractive risk-adjusted total returns to its investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. Its portfolio consists of two categories of Agency RMBS: pass-through Agency RMBS and structured Agency RMBS. It invests in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. The mortgage loans underlying pass-through certificates are classified into three categories, including fixed-rate mortgages, adjustable-rate mortgages (ARMs) and Hybrid ARMs. It invests in structured Agency RMBS, which include collateralized mortgage obligations, interest only securities, inverse interest only securities and principal only securities.

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