Head-To-Head Review: Orchid Island Capital (NYSE:ORC) & WhiteHorse Finance (NASDAQ:WHF)

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

Dividends

WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 12.6%. Orchid Island Capital pays an annual dividend of $1.20 per share and has a dividend yield of 24.4%. WhiteHorse Finance pays out 126.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years and Orchid Island Capital has raised its dividend for 1 consecutive years. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
WhiteHorse Finance	$72.67 million	2.35	$14.34 million	$0.79	10.07
Orchid Island Capital	$414.00 million	2.37	$159.03 million	$1.48	3.32

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

Insider & Institutional Ownership

13.2% of WhiteHorse Finance shares are held by institutional investors. Comparatively, 32.7% of Orchid Island Capital shares are held by institutional investors. 3.8% of WhiteHorse Finance shares are held by insiders. Comparatively, 0.3% of Orchid Island Capital shares are held by 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.

Analyst Ratings

This is a breakdown of recent recommendations for WhiteHorse Finance and Orchid Island Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
WhiteHorse Finance	2	2	1	0	1.80
Orchid Island Capital	1	2	0	0	1.67

WhiteHorse Finance currently has a consensus target price of $7.83, suggesting a potential downside of 1.53%. Orchid Island Capital has a consensus target price of $7.50, suggesting a potential upside of 52.59%. Given Orchid Island Capital’s higher possible upside, analysts plainly believe Orchid Island Capital is more favorable than WhiteHorse Finance.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
WhiteHorse Finance	26.88%	8.94%	3.75%
Orchid Island Capital	N/A	11.87%	1.35%

Risk & Volatility

WhiteHorse Finance has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 1.6, indicating that its stock price is 60% more volatile than the S&P 500.

Summary

Orchid Island Capital beats WhiteHorse Finance on 10 of the 17 factors compared between the two stocks.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.

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.