Redwood Trust (NYSE:RWT – Get Free Report) and AGNC Investment (NASDAQ:AGNCL – Get Free Report) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, institutional ownership, risk, valuation, earnings, profitability and analyst recommendations.
Analyst Recommendations
This is a summary of recent ratings and target prices for Redwood Trust and AGNC Investment, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Redwood Trust | 0 | 2 | 3 | 1 | 2.83 |
| AGNC Investment | 0 | 0 | 0 | 0 | N/A |
Redwood Trust presently has a consensus target price of $8.50, suggesting a potential upside of 23.37%. Given Redwood Trust’s higher possible upside, analysts clearly believe Redwood Trust is more favorable than AGNC Investment.
Earnings & Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Redwood Trust | $708.00 million | 1.11 | -$163.52 million | ($0.82) | -8.40 |
| AGNC Investment | $108.00 million | N/A | N/A | N/A | N/A |
AGNC Investment has lower revenue, but higher earnings than Redwood Trust.
Dividends
Redwood Trust pays an annual dividend of $0.64 per share and has a dividend yield of 9.3%. AGNC Investment pays an annual dividend of $1.94 per share and has a dividend yield of 9.2%. Redwood Trust pays out -78.0% of its earnings in the form of a dividend.
Profitability
This table compares Redwood Trust and AGNC Investment’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Redwood Trust | -12.13% | 3.76% | 0.31% |
| AGNC Investment | N/A | N/A | N/A |
Insider and Institutional Ownership
69.9% of Redwood Trust shares are held by institutional investors. 2.2% of Redwood Trust shares are held by 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
Redwood Trust beats AGNC Investment on 10 of the 11 factors compared between the two stocks.
About Redwood Trust
Redwood Trust, Inc., together with its subsidiaries, operates as a specialty finance company in the United States. The company operates through three segments: Residential Mortgage Banking, Business Purpose Mortgage Banking, and Investment Portfolio. The Residential Mortgage Banking segment operates a mortgage loan conduit that acquires residential loans from third-party originators for subsequent sale, securitization, or transfer to its investment portfolio. This segment also offers derivative financial instruments to manage risks associated with residential loans. The Business Purpose Mortgage Banking segment operates a platform that originates and acquires business purpose loans, such as single-family rental and bridge loans for subsequent securitization, sale, or transfer into its investment portfolio. The Investment Portfolio segment invests in securities retained from residential and business purpose securitization activities, and residential and small-balance multifamily bridge loans, as well as residential mortgage-backed securities issued by third parties, Freddie Mac K-Series multifamily loan securitizations and reperforming loan securitizations, servicer advance investments, home equity investments, and other housing-related investments. 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. Redwood Trust, Inc. was incorporated in 1994 and is headquartered in Mill Valley, California.
About AGNC Investment
AGNC Investment Corp. operates as a real estate investment trust (REIT) in the United States. It invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by the United States government-sponsored enterprise or by the United States government agency. The company funds its investments primarily through collateralized borrowings structured as repurchase agreements. It has elected to be taxed as a REIT under the Internal Revenue Code of 1986 and would not be subject to federal corporate income taxes, if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as American Capital Agency Corp. and changed its name to AGNC Investment Corp. in September 2016. AGNC Investment Corp. was incorporated in 2008 and is headquartered in Bethesda, Maryland.
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