Critical Survey: Farmland Partners (FPI) and Anworth Mortgage Asset (ANH)

Farmland Partners (NYSE: FPI) and Anworth Mortgage Asset (NYSE:ANH) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, institutional ownership and profitability.

Profitability

This table compares Farmland Partners and Anworth Mortgage Asset’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Farmland Partners 15.89% 2.05% 0.74%
Anworth Mortgage Asset 37.57% 8.84% 0.95%

Valuation and Earnings

This table compares Farmland Partners and Anworth Mortgage Asset’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Farmland Partners $31.00 million 9.25 $4.30 million $0.19 46.69
Anworth Mortgage Asset $52.04 million 10.61 $22.49 million $0.44 12.80

Anworth Mortgage Asset has higher revenue and earnings than Farmland Partners. Anworth Mortgage Asset is trading at a lower price-to-earnings ratio than Farmland Partners, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Farmland Partners has a beta of 0.21, suggesting that its stock price is 79% less volatile than the S&P 500. Comparatively, Anworth Mortgage Asset has a beta of 0.19, suggesting that its stock price is 81% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for Farmland Partners and Anworth Mortgage Asset, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Farmland Partners 0 5 1 0 2.17
Anworth Mortgage Asset 0 1 0 0 2.00

Farmland Partners presently has a consensus target price of $9.95, indicating a potential upside of 12.18%. Anworth Mortgage Asset has a consensus target price of $6.00, indicating a potential upside of 6.57%. Given Farmland Partners’ stronger consensus rating and higher probable upside, analysts clearly believe Farmland Partners is more favorable than Anworth Mortgage Asset.

Dividends

Farmland Partners pays an annual dividend of $0.51 per share and has a dividend yield of 5.7%. Anworth Mortgage Asset pays an annual dividend of $0.60 per share and has a dividend yield of 10.7%. Farmland Partners pays out 268.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Anworth Mortgage Asset pays out 136.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Farmland Partners has increased its dividend for 2 consecutive years and Anworth Mortgage Asset has increased its dividend for 2 consecutive years. Anworth Mortgage Asset is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

41.0% of Farmland Partners shares are held by institutional investors. Comparatively, 56.4% of Anworth Mortgage Asset shares are held by institutional investors. 2.8% of Farmland Partners shares are held by company insiders. Comparatively, 1.9% of Anworth Mortgage Asset shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Anworth Mortgage Asset beats Farmland Partners on 10 of the 16 factors compared between the two stocks.

Farmland Partners Company Profile

Farmland Partners, Inc. is an internally managed real estate company. The Company owns and seeks to acquire farmland located in agricultural markets throughout North America. The Company is the sole member of the general partner of Farmland Partners Operating Partnership, LP (the Operating Partnership). All of the Company’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and the subsidiaries of the Operating Partnership. The Company’s principal investment focus is on farmland located in agricultural markets throughout North America, however, it may seek to acquire farmland outside of North America. It also may acquire properties related to farming, such as grain storage facilities, grain elevators, feedlots, cold storage facilities, processing plants and distribution centers, as well as livestock farms or ranches. As of December 31, 2016, the Company owned approximately 115,489 acres, as well as eight grain storage facilities.

Anworth Mortgage Asset Company Profile

Anworth Mortgage Asset Corporation is a real estate investment trust (REIT). The Company’s investment objective is to provide risk-adjusted total returns to its stockholders over the long-term primarily through dividends and secondarily through capital appreciation. Its strategy is to invest in residential mortgage-backed securities (MBS) (both Agency MBS and Non-Agency MBS), residential mortgage loans and residential rental properties. Its principal business objective is to generate net income for distribution to its stockholders primarily based upon the spread between the interest income on its mortgage assets and its borrowing costs to finance its acquisition of those assets. The Company finances residential mortgage loans through asset-backed securities, which are issued by the consolidated securitization trusts. The Company is engaged in investing in, financing and managing a portfolio of residential mortgage-backed securities and residential mortgage loans.

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