KKR Real Estate Finance Trust (NYSE: KREF) and Western Asset Mortgage Capital (NYSE:WMC) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, analyst recommendations, valuation and dividends.

Insider & Institutional Ownership

65.7% of KKR Real Estate Finance Trust shares are owned by institutional investors. Comparatively, 43.0% of Western Asset Mortgage Capital shares are owned by institutional investors. 0.4% of Western Asset Mortgage Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares KKR Real Estate Finance Trust and Western Asset Mortgage Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KKR Real Estate Finance Trust 77.41% 6.08% 0.75%
Western Asset Mortgage Capital 18.57% 1.81% 0.23%

Dividends

KKR Real Estate Finance Trust pays an annual dividend of $1.48 per share and has a dividend yield of 7.2%. Western Asset Mortgage Capital pays an annual dividend of $1.24 per share and has a dividend yield of 12.2%. Western Asset Mortgage Capital pays out 206.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings and Valuation

This table compares KKR Real Estate Finance Trust and Western Asset Mortgage Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KKR Real Estate Finance Trust $41.19 million 26.85 $31.15 million N/A N/A
Western Asset Mortgage Capital $91.33 million 4.68 -$25.01 million $0.60 16.98

KKR Real Estate Finance Trust has higher earnings, but lower revenue than Western Asset Mortgage Capital.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for KKR Real Estate Finance Trust and Western Asset Mortgage Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KKR Real Estate Finance Trust 0 3 0 0 2.00
Western Asset Mortgage Capital 0 2 0 0 2.00

KKR Real Estate Finance Trust currently has a consensus price target of $22.50, suggesting a potential upside of 9.22%. Western Asset Mortgage Capital has a consensus price target of $10.00, suggesting a potential downside of 1.86%. Given KKR Real Estate Finance Trust’s higher possible upside, equities analysts clearly believe KKR Real Estate Finance Trust is more favorable than Western Asset Mortgage Capital.

Summary

KKR Real Estate Finance Trust beats Western Asset Mortgage Capital on 8 of the 11 factors compared between the two stocks.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc is a real estate finance company that focuses primarily on originating and acquiring senior mortgage loans secured by commercial real estate assets (CRE). KKR manages investments across multiple asset classes, including private equity, real estate, energy, infrastructure, credit and hedge funds. The Company’s investment strategy is to originate or acquire senior mortgage loans collateralized by institutional-quality CRE assets. Its target assets also include mezzanine loans, preferred equity and other debt-oriented instruments. The Company’s investment objective is capital preservation and generating attractive risk-adjusted returns for its stockholders over the long term, primarily through dividends.

About Western Asset Mortgage Capital

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

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