Financial Review: Franklin BSP Realty Trust (NYSE:FBRT) versus Ellington Credit (NYSE:EARN)

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

Dividends

Franklin BSP Realty Trust pays an annual dividend of $0.80 per share and has a dividend yield of 9.6%. Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 20.8%. Franklin BSP Realty Trust pays out 156.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ellington Credit pays out -92.3% of its earnings in the form of a dividend. Ellington Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Franklin BSP Realty Trust has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500. Comparatively, Ellington Credit has a beta of 1.26, indicating that its stock price is 26% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Franklin BSP Realty Trust and Ellington Credit, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin BSP Realty Trust	2	0	3	0	2.20
Ellington Credit	0	1	1	0	2.50

Franklin BSP Realty Trust presently has a consensus target price of $11.50, suggesting a potential upside of 37.64%. Ellington Credit has a consensus target price of $5.75, suggesting a potential upside of 24.59%. Given Franklin BSP Realty Trust’s higher possible upside, equities analysts clearly believe Franklin BSP Realty Trust is more favorable than Ellington Credit.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Franklin BSP Realty Trust	24.26%	6.46%	1.34%
Ellington Credit	-75.00%	16.47%	3.87%

Insider & Institutional Ownership

59.9% of Franklin BSP Realty Trust shares are held by institutional investors. Comparatively, 20.4% of Ellington Credit shares are held by institutional investors. 1.3% of Franklin BSP Realty Trust shares are held by company insiders. Comparatively, 1.4% of Ellington Credit shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Franklin BSP Realty Trust and Ellington Credit”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin BSP Realty Trust	$270.07 million	2.38	$82.27 million	$0.51	16.38
Ellington Credit	$51.80 million	3.35	-$38.85 million	($1.04)	-4.44

Franklin BSP Realty Trust has higher revenue and earnings than Ellington Credit. Ellington Credit 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.

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.

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.