Invesco Mortgage Capital (NYSE:IVR) and Two Harbors Investment (NYSE:TWO) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their analyst recommendations, profitability, risk, valuation, earnings, institutional ownership and dividends.
Risk and Volatility
Invesco Mortgage Capital has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500. Comparatively, Two Harbors Investment has a beta of 1.75, indicating that its stock price is 75% more volatile than the S&P 500.
Profitability
This table compares Invesco Mortgage Capital and Two Harbors Investment's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Invesco Mortgage Capital | N/A | -8.30% | -0.91% |
| Two Harbors Investment | -246.97% | 11.09% | 1.09% |
Dividends
Invesco Mortgage Capital pays an annual dividend of $0.36 per share and has a dividend yield of 10.0%. Two Harbors Investment pays an annual dividend of $0.68 per share and has a dividend yield of 9.6%. Invesco Mortgage Capital pays out 18.8% of its earnings in the form of a dividend. Two Harbors Investment pays out 49.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Invesco Mortgage Capital has increased its dividend for 1 consecutive years and Two Harbors Investment has increased its dividend for 1 consecutive years. Invesco Mortgage Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Recommendations
This is a summary of current ratings and recommmendations for Invesco Mortgage Capital and Two Harbors Investment, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Invesco Mortgage Capital | 4 | 0 | 0 | 0 | 1.00 |
| Two Harbors Investment | 0 | 7 | 1 | 0 | 2.13 |
Invesco Mortgage Capital presently has a consensus price target of $2.5625, suggesting a potential downside of 29.02%. Two Harbors Investment has a consensus price target of $6.50, suggesting a potential downside of 8.71%. Given Two Harbors Investment's stronger consensus rating and higher possible upside, analysts clearly believe Two Harbors Investment is more favorable than Invesco Mortgage Capital.
Valuation and Earnings
This table compares Invesco Mortgage Capital and Two Harbors Investment's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Invesco Mortgage Capital | $882.59 million | 0.94 | $364.10 million | $1.92 | 1.88 |
| Two Harbors Investment | $994.69 million | 1.96 | $323.96 million | $1.37 | 5.20 |
Invesco Mortgage Capital has higher earnings, but lower revenue than Two Harbors Investment. Invesco Mortgage Capital is trading at a lower price-to-earnings ratio than Two Harbors Investment, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
51.3% of Invesco Mortgage Capital shares are held by institutional investors. Comparatively, 59.7% of Two Harbors Investment shares are held by institutional investors. 0.2% of Invesco Mortgage Capital shares are held by insiders. Comparatively, 0.8% of Two Harbors Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Summary
Two Harbors Investment beats Invesco Mortgage Capital on 10 of the 16 factors compared between the two stocks.
