Critical Review: NexPoint Residential Trust (NYSE:NXRT) vs. Annaly Capital Management (NYSE:NLY)

NexPoint Residential Trust (NYSE:NXRT) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Profitability

This table compares NexPoint Residential Trust and Annaly Capital Management’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NexPoint Residential Trust	32.93%	17.69%	4.28%
Annaly Capital Management	-12.02%	15.24%	1.60%

Earnings & Valuation

This table compares NexPoint Residential Trust and Annaly Capital Management’s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NexPoint Residential Trust	$270.55 million	4.16	$44.26 million	$2.83	15.48
Annaly Capital Management	-$316.59 million	-31.35	-$1.64 billion	($0.97)	-20.44

NexPoint Residential Trust has higher revenue and earnings than Annaly Capital Management. Annaly Capital Management is trading at a lower price-to-earnings ratio than NexPoint Residential Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings and target prices for NexPoint Residential Trust and Annaly Capital Management, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NexPoint Residential Trust	0	4	2	0	2.33
Annaly Capital Management	0	2	6	0	2.75

NexPoint Residential Trust currently has a consensus target price of $43.20, suggesting a potential downside of 1.37%. Annaly Capital Management has a consensus target price of $21.14, suggesting a potential upside of 6.62%. Given Annaly Capital Management’s stronger consensus rating and higher probable upside, analysts clearly believe Annaly Capital Management is more favorable than NexPoint Residential Trust.

Volatility & Risk

NexPoint Residential Trust has a beta of 1.35, indicating that its share price is 35% more volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 1.53, indicating that its share price is 53% more volatile than the S&P 500.

Dividends

NexPoint Residential Trust pays an annual dividend of $1.85 per share and has a dividend yield of 4.2%. Annaly Capital Management pays an annual dividend of $2.60 per share and has a dividend yield of 13.1%. NexPoint Residential Trust pays out 65.4% of its earnings in the form of a dividend. Annaly Capital Management pays out -268.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

76.6% of NexPoint Residential Trust shares are owned by institutional investors. Comparatively, 51.6% of Annaly Capital Management shares are owned by institutional investors. 13.0% of NexPoint Residential Trust shares are owned by company insiders. Comparatively, 0.2% of Annaly Capital Management shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

NexPoint Residential Trust beats Annaly Capital Management on 10 of the 16 factors compared between the two stocks.

About NexPoint Residential Trust

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NXRT," primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with "value-add" potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor, which has extensive real estate experience.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.