Comparing Invesco Mortgage Capital (NYSE:IVR) & PennyMac Mortgage Investment Trust (NYSE:PMT)

Invesco Mortgage Capital (NYSE:IVR) and PennyMac Mortgage Investment Trust (NYSE:PMT) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Analyst Ratings

This is a breakdown of current ratings for Invesco Mortgage Capital and PennyMac Mortgage Investment Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Invesco Mortgage Capital	0	3	1	0	2.25
PennyMac Mortgage Investment Trust	1	5	3	0	2.22

Invesco Mortgage Capital presently has a consensus price target of $8.38, suggesting a potential upside of 52.13%. PennyMac Mortgage Investment Trust has a consensus price target of $10.75, suggesting a potential upside of 30.40%. Given Invesco Mortgage Capital’s stronger consensus rating and higher probable upside, equities analysts clearly believe Invesco Mortgage Capital is more favorable than PennyMac Mortgage Investment Trust.

Valuation & Earnings

This table compares Invesco Mortgage Capital 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
Invesco Mortgage Capital	$295.29 million	2.01	$101.28 million	($0.18)	-30.58
PennyMac Mortgage Investment Trust	$307.46 million	2.34	$127.87 million	$0.46	17.92

PennyMac Mortgage Investment Trust has higher revenue and earnings than Invesco Mortgage Capital. Invesco Mortgage Capital 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

40.5% of Invesco Mortgage Capital shares are held by institutional investors. Comparatively, 67.4% of PennyMac Mortgage Investment Trust shares are held by institutional investors. 0.2% of Invesco Mortgage Capital shares are held by insiders. Comparatively, 1.0% of PennyMac Mortgage Investment Trust shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Invesco Mortgage Capital pays an annual dividend of $1.44 per share and has a dividend yield of 26.2%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.60 per share and has a dividend yield of 19.4%. Invesco Mortgage Capital pays out -800.0% of its earnings in the form of a dividend. PennyMac Mortgage Investment Trust pays out 347.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Invesco Mortgage Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Invesco Mortgage Capital has a beta of 1.73, indicating that its share price is 73% more volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 1.21, indicating that its share price is 21% more volatile than the S&P 500.

Profitability

This table compares Invesco Mortgage Capital and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Invesco Mortgage Capital	-8.49%	26.75%	2.80%
PennyMac Mortgage Investment Trust	29.15%	11.40%	0.62%

Summary

PennyMac Mortgage Investment Trust beats Invesco Mortgage Capital on 9 of the 16 factors compared between the two stocks.

About Invesco Mortgage Capital

Invesco Mortgage Capital Inc. operates as a real estate investment trust (REIT) that invests, finances, and manages mortgage-backed securities and other mortgage-related assets in the United States. It invests in residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) that are guaranteed by a U.S. government agency or federally chartered corporation; RMBS and CMBS that are not issued or guaranteed by the United States government agency or federally chartered corporation; the United States treasury securities; real estate-related financing arrangements; to-be-announced securities forward contracts to purchase RMBS; and commercial mortgage loans. It has elected to be taxed as a REIT and would be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2008 and is headquartered in Atlanta, Georgia.

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.