Analyzing MFA Financial (NYSE:MFA) and Franklin BSP Realty Trust (NYSE:FBRT)

MFA Financial (NYSE:MFA) and Franklin BSP Realty Trust (NYSE:FBRT) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, valuation, analyst recommendations, dividends, institutional ownership, risk and earnings.

Insider and Institutional Ownership

65.3% of MFA Financial shares are owned by institutional investors. Comparatively, 59.9% of Franklin BSP Realty Trust shares are owned by institutional investors. 0.8% of MFA Financial shares are owned by insiders. Comparatively, 1.4% of Franklin BSP Realty Trust shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

MFA Financial has a beta of 1.7, meaning that its share price is 70% more volatile than the S&P 500. Comparatively, Franklin BSP Realty Trust has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Profitability

This table compares MFA Financial and Franklin BSP Realty Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFA Financial	17.62%	8.61%	1.39%
Franklin BSP Realty Trust	53.36%	7.26%	1.54%

Earnings and Valuation

This table compares MFA Financial and Franklin BSP Realty Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFA Financial	$723.97 million	1.28	$119.25 million	$0.87	10.41
Franklin BSP Realty Trust	$516.24 million	1.70	$95.88 million	$0.98	10.86

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

Analyst Ratings

This is a breakdown of recent ratings and price targets for MFA Financial and Franklin BSP Realty Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFA Financial	1	3	4	0	2.38
Franklin BSP Realty Trust	0	1	4	1	3.00

MFA Financial currently has a consensus target price of $11.75, indicating a potential upside of 29.76%. Franklin BSP Realty Trust has a consensus target price of $14.67, indicating a potential upside of 37.84%. Given Franklin BSP Realty Trust’s stronger consensus rating and higher probable upside, analysts plainly believe Franklin BSP Realty Trust is more favorable than MFA Financial.

Dividends

MFA Financial pays an annual dividend of $1.44 per share and has a dividend yield of 15.9%. Franklin BSP Realty Trust pays an annual dividend of $1.42 per share and has a dividend yield of 13.3%. MFA Financial pays out 165.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin BSP Realty Trust pays out 144.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MFA Financial has raised its dividend for 1 consecutive years. MFA Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Franklin BSP Realty Trust beats MFA Financial on 10 of the 17 factors compared between the two stocks.

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.

About Franklin BSP Realty Trust

Benefit Street Partners operates as a self-managed real estate investment trust (REIT). BSP earns income from investing in a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the government-sponsored enterprises (GSEs)), or by an agency of the federal government, Government National Mortgage Association (Ginnie Mae). BSP’s investment strategy focuses on managing a portfolio of residential mortgage investments consisting almost exclusively of ARM Agency Securities. As of December 31, 2012, the Company’s securities consisted of Agency Securities classified as available-for-sale and Residential mortgage securities classified as held-to-maturity.