Ellington Credit (NYSE:EARN) & Two Harbors Investments (NYSE:TWO) Head-To-Head Survey

Two Harbors Investments (NYSE:TWO) and Ellington Credit (NYSE:EARN) 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, earnings, risk, institutional ownership, valuation, analyst recommendations and dividends.

Insider & Institutional Ownership

64.2% of Two Harbors Investments shares are owned by institutional investors. Comparatively, 20.4% of Ellington Credit shares are owned by institutional investors. 0.6% of Two Harbors Investments shares are owned by company insiders. Comparatively, 1.4% of Ellington Credit shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Two Harbors Investments and Ellington Credit”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investments	$450.15 million	2.32	$298.17 million	($2.50)	-4.01
Ellington Credit	$15.07 million	12.75	$6.59 million	$0.08	63.94

Two Harbors Investments has higher revenue and earnings than Ellington Credit. Two Harbors Investments is trading at a lower price-to-earnings ratio than Ellington Credit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Two Harbors Investments and Ellington Credit’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investments	-44.10%	11.92%	1.32%
Ellington Credit	12.41%	16.47%	3.87%

Dividends

Two Harbors Investments pays an annual dividend of $1.36 per share and has a dividend yield of 13.6%. Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 18.8%. Two Harbors Investments pays out -54.4% of its earnings in the form of a dividend. Ellington Credit pays out 1,200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments has increased its dividend for 1 consecutive years.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Two Harbors Investments and Ellington Credit, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investments	1	5	2	1	2.33
Ellington Credit	0	1	1	0	2.50

Two Harbors Investments presently has a consensus target price of $11.96, suggesting a potential upside of 19.29%. Ellington Credit has a consensus target price of $5.88, suggesting a potential upside of 14.86%. Given Two Harbors Investments’ higher probable upside, research analysts plainly believe Two Harbors Investments is more favorable than Ellington Credit.

Volatility and Risk

Two Harbors Investments has a beta of 1.2, indicating that its share price is 20% more volatile than the S&P 500. Comparatively, Ellington Credit has a beta of 1.3, indicating that its share price is 30% more volatile than the S&P 500.

Summary

Ellington Credit beats Two Harbors Investments on 10 of the 18 factors compared between the two stocks.

About Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based in Old Greenwich, Connecticut.