Reviewing Lument Finance Trust (NYSE:LFT) and MFA Financial (NYSE:MFA)

Lument Finance Trust (NYSE:LFT) and MFA Financial (NYSE:MFA) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, earnings, profitability, risk, analyst recommendations, valuation and dividends.

Insider & Institutional Ownership

19.5% of Lument Finance Trust shares are owned by institutional investors. Comparatively, 65.3% of MFA Financial shares are owned by institutional investors. 3.3% of Lument Finance Trust shares are owned by company insiders. Comparatively, 1.0% of MFA Financial shares are owned by company 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.

Risk and Volatility

Lument Finance Trust has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500. Comparatively, MFA Financial has a beta of 1.42, suggesting that its stock price is 42% more volatile than the S&P 500.

Dividends

Lument Finance Trust pays an annual dividend of $0.16 per share and has a dividend yield of 26.2%. MFA Financial pays an annual dividend of $1.44 per share and has a dividend yield of 15.8%. Lument Finance Trust pays out -44.4% of its earnings in the form of a dividend. MFA Financial pays out 144.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Lument Finance Trust has raised its dividend for 2 consecutive years and MFA Financial has raised its dividend for 1 consecutive years. Lument Finance Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Lument Finance Trust and MFA Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lument Finance Trust	1	0	0	0	1.00
MFA Financial	0	3	4	0	2.57

MFA Financial has a consensus price target of $10.46, indicating a potential upside of 14.99%. Given MFA Financial’s stronger consensus rating and higher possible upside, analysts plainly believe MFA Financial is more favorable than Lument Finance Trust.

Valuation & Earnings

This table compares Lument Finance Trust and MFA Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lument Finance Trust	$79.00 million	0.41	-$2.74 million	($0.36)	-1.69
MFA Financial	$745.06 million	1.23	$176.78 million	$1.00	9.10

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

Profitability

This table compares Lument Finance Trust and MFA Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lument Finance Trust	-18.00%	0.86%	0.12%
MFA Financial	19.38%	7.58%	1.05%

Summary

MFA Financial beats Lument Finance Trust on 13 of the 17 factors compared between the two stocks.

About Lument Finance Trust

Lument Finance Trust, Inc., a real estate investment trust, focuses on investing in, financing, and managing a portfolio of commercial real estate (CRE) debt investments in the United States. The company primarily invests in transitional floating rate CRE mortgage loans on middle market multi-family assets; and other CRE -related investments, including mezzanine loans, preferred equity, commercial mortgage-backed securities, fixed rate loans, construction loans, and other CRE debt instruments. Lument Finance Trust, Inc. is qualified as a real estate investment trust (REIT) under the Internal Revenue Code of 1986. As a REIT, it would not be subject to federal income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Hunt Companies Finance Trust, Inc. and changed its name to Lument Finance Trust, Inc. in December 2020. Lument Finance Trust, Inc. was incorporated in 2012 and is headquartered in New York, New York.

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.