Contrasting AFC Gamma (NASDAQ:AFCG) & Orchid Island Capital (NYSE:ORC)

Orchid Island Capital (NYSE:ORC) and AFC Gamma (NASDAQ:AFCG) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, analyst recommendations, valuation and dividends.

Dividends

Orchid Island Capital pays an annual dividend of $1.44 per share and has a dividend yield of 19.8%. AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 21.5%. Orchid Island Capital pays out 293.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AFC Gamma pays out -57.7% of its earnings in the form of a dividend. Orchid Island Capital has increased its dividend for 1 consecutive years. AFC Gamma is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Orchid Island Capital and AFC Gamma”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Orchid Island Capital	$241.58 million	5.40	$37.66 million	$0.49	14.87
AFC Gamma	$51.99 million	1.21	$16.78 million	($1.04)	-2.68

Orchid Island Capital has higher revenue and earnings than AFC Gamma. AFC Gamma is trading at a lower price-to-earnings ratio than Orchid Island Capital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Orchid Island Capital and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Orchid Island Capital	N/A	6.69%	0.79%
AFC Gamma	-70.46%	8.45%	4.90%

Insider and Institutional Ownership

32.7% of Orchid Island Capital shares are held by institutional investors. Comparatively, 26.5% of AFC Gamma shares are held by institutional investors. 0.4% of Orchid Island Capital shares are held by insiders. Comparatively, 25.1% of AFC Gamma shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Orchid Island Capital has a beta of 1.66, meaning that its share price is 66% more volatile than the S&P 500. Comparatively, AFC Gamma has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Orchid Island Capital and AFC Gamma, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Orchid Island Capital	1	3	0	0	1.75
AFC Gamma	1	4	0	0	1.80

Orchid Island Capital presently has a consensus price target of $7.50, indicating a potential upside of 2.95%. AFC Gamma has a consensus price target of $5.75, indicating a potential upside of 106.09%. Given AFC Gamma’s stronger consensus rating and higher possible upside, analysts clearly believe AFC Gamma is more favorable than Orchid Island Capital.

Summary

Orchid Island Capital beats AFC Gamma on 9 of the 16 factors compared between the two stocks.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.