NexPoint Real Estate Finance (NYSE:NREF – Get Free Report) and PennyMac Mortgage Investment Trust (NYSE:PMT – Get Free Report) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, risk, analyst recommendations and profitability.
Profitability
This table compares NexPoint Real Estate Finance and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| NexPoint Real Estate Finance | 81.96% | 21.49% | 1.34% |
| PennyMac Mortgage Investment Trust | 34.65% | 7.68% | 0.71% |
Dividends
NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 14.1%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.60 per share and has a dividend yield of 12.7%. NexPoint Real Estate Finance pays out 83.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennyMac Mortgage Investment Trust pays out 222.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Real Estate Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| NexPoint Real Estate Finance | 1 | 3 | 0 | 0 | 1.75 |
| PennyMac Mortgage Investment Trust | 2 | 5 | 1 | 0 | 1.88 |
NexPoint Real Estate Finance presently has a consensus price target of $14.75, suggesting a potential upside of 3.95%. PennyMac Mortgage Investment Trust has a consensus price target of $14.00, suggesting a potential upside of 11.05%. Given PennyMac Mortgage Investment Trust’s stronger consensus rating and higher probable upside, analysts clearly believe PennyMac Mortgage Investment Trust is more favorable than NexPoint Real Estate Finance.
Volatility & Risk
NexPoint Real Estate Finance has a beta of 1.28, suggesting that its share price is 28% more volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 1.29, suggesting that its share price is 29% more volatile than the S&P 500.
Valuation & Earnings
This table compares NexPoint Real Estate Finance and PennyMac Mortgage Investment Trust”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| NexPoint Real Estate Finance | $72.51 million | 3.47 | $29.19 million | $2.41 | 5.89 |
| PennyMac Mortgage Investment Trust | $334.19 million | 3.28 | $160.98 million | $0.72 | 17.51 |
PennyMac Mortgage Investment Trust has higher revenue and earnings than NexPoint Real Estate Finance. NexPoint Real Estate Finance is trading at a lower price-to-earnings ratio than PennyMac Mortgage Investment Trust, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
67.8% of NexPoint Real Estate Finance shares are held by institutional investors. Comparatively, 67.4% of PennyMac Mortgage Investment Trust shares are held by institutional investors. 55.7% of NexPoint Real Estate Finance shares are held by insiders. Comparatively, 0.9% of PennyMac Mortgage Investment Trust shares are held 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.
Summary
NexPoint Real Estate Finance beats PennyMac Mortgage Investment Trust on 9 of the 16 factors compared between the two stocks.
About NexPoint Real Estate Finance
NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.
About PennyMac Mortgage Investment Trust
PennyMac Mortgage Investment Trust, through its subsidiary, primarily invests in mortgage-related assets in the United States. The company operates through: Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production segments. Its Credit Sensitive Strategies segment invests in credit risk transfer (CRT) agreements, CRT securities, subordinate mortgage-backed securities (MBS), distressed loans, and real estate. The company's Interest Rate Sensitive Strategies segment engages in investing in mortgage servicing rights, excess servicing spreads, and agency and senior non-agency MBS, as well as related interest rate hedging activities. Its Correspondent Production segment is involved in purchasing, pooling, and reselling newly originated prime credit residential loans directly or in the form of MBS. The company primarily sells its loans to government-sponsored entities or PennyMac Loan Services, LLC. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its shareholders. The company was incorporated in 2009 and is headquartered in Westlake Village, California.
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