Chimera Investment (NYSE:CIM) vs. Two Harbors Investment (NYSE:TWO) Critical Survey

Chimera Investment (NYSE:CIM) and Two Harbors Investment (NYSE:TWO) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their profitability, risk, dividends, valuation, analyst recommendations, earnings and institutional ownership.

Institutional & Insider Ownership

48.4% of Chimera Investment shares are held by institutional investors. Comparatively, 64.2% of Two Harbors Investment shares are held by institutional investors. 0.9% of Chimera Investment shares are held by insiders. Comparatively, 0.6% of Two Harbors Investment shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Chimera Investment and Two Harbors Investment’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chimera Investment	$772.90 million	1.58	$126.10 million	$1.53	9.92
Two Harbors Investment	$480.36 million	2.98	-$106.37 million	$1.78	7.76

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

Analyst Ratings

This is a summary of recent ratings and price targets for Chimera Investment and Two Harbors Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chimera Investment	0	2	0	0	2.00
Two Harbors Investment	0	6	2	0	2.25

Chimera Investment currently has a consensus target price of $15.75, indicating a potential upside of 3.75%. Two Harbors Investment has a consensus target price of $14.64, indicating a potential upside of 6.18%. Given Two Harbors Investment’s stronger consensus rating and higher probable upside, analysts plainly believe Two Harbors Investment is more favorable than Chimera Investment.

Volatility and Risk

Chimera Investment has a beta of 1.72, suggesting that its stock price is 72% more volatile than the S&P 500. Comparatively, Two Harbors Investment has a beta of 1.86, suggesting that its stock price is 86% more volatile than the S&P 500.

Profitability

This table compares Chimera Investment and Two Harbors Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chimera Investment	25.73%	7.46%	1.48%
Two Harbors Investment	56.90%	2.16%	0.25%

Dividends

Chimera Investment pays an annual dividend of $1.40 per share and has a dividend yield of 9.2%. Two Harbors Investment pays an annual dividend of $1.80 per share and has a dividend yield of 13.0%. Chimera Investment pays out 91.5% 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 Investment pays out 101.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Two Harbors Investment beats Chimera Investment on 9 of the 16 factors compared between the two stocks.

About Chimera Investment

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries, invests in a portfolio of mortgage assets, including residential mortgage loans, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, agency mortgage-backed securities secured by pools of commercial mortgage loans, business purpose and investor loans, and other real estate related securities. It invests in investment grade, non-investment grade, and non-rated classes. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Chimera Investment Corporation was incorporated in 2007 and is headquartered in New York, New York.

About Two Harbors Investment

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.