Critical Contrast: NexPoint Real Estate Finance (NYSE:NREF) versus Cherry Hill Mortgage Investment (NYSE:CHMI)

NexPoint Real Estate Finance (NYSE:NREF) and Cherry Hill Mortgage Investment (NYSE:CHMI) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, risk, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Insider and Institutional Ownership

67.8% of NexPoint Real Estate Finance shares are held by institutional investors. Comparatively, 18.5% of Cherry Hill Mortgage Investment shares are held by institutional investors. 55.7% of NexPoint Real Estate Finance shares are held by company insiders. Comparatively, 1.5% of Cherry Hill Mortgage Investment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares NexPoint Real Estate Finance and Cherry Hill Mortgage Investment”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
NexPoint Real Estate Finance	$89.95 million	2.54	$110.28 million	$2.90	4.45
Cherry Hill Mortgage Investment	$61.10 million	1.53	$6.83 million	($0.13)	-19.58

NexPoint Real Estate Finance has higher revenue and earnings than Cherry Hill Mortgage Investment. Cherry Hill Mortgage Investment is trading at a lower price-to-earnings ratio than NexPoint Real Estate Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares NexPoint Real Estate Finance and Cherry Hill Mortgage Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
NexPoint Real Estate Finance	122.60%	15.63%	1.04%
Cherry Hill Mortgage Investment	7.28%	16.21%	1.38%

Analyst Ratings

This is a summary of current ratings and price targets for NexPoint Real Estate Finance and Cherry Hill Mortgage Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
NexPoint Real Estate Finance	1	3	0	0	1.75
Cherry Hill Mortgage Investment	1	1	2	0	2.25

NexPoint Real Estate Finance presently has a consensus target price of $14.50, suggesting a potential upside of 12.40%. Cherry Hill Mortgage Investment has a consensus target price of $3.00, suggesting a potential upside of 17.88%. Given Cherry Hill Mortgage Investment’s stronger consensus rating and higher possible upside, analysts clearly believe Cherry Hill Mortgage Investment is more favorable than NexPoint Real Estate Finance.

Volatility and Risk

NexPoint Real Estate Finance has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500. Comparatively, Cherry Hill Mortgage Investment has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500.

Dividends

NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 15.5%. Cherry Hill Mortgage Investment pays an annual dividend of $0.40 per share and has a dividend yield of 15.7%. NexPoint Real Estate Finance pays out 69.0% of its earnings in the form of a dividend. Cherry Hill Mortgage Investment pays out -307.7% 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. Cherry Hill Mortgage Investment has raised its dividend for 1 consecutive years. Cherry Hill Mortgage Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

NexPoint Real Estate Finance beats Cherry Hill Mortgage Investment on 9 of the 17 factors compared between the two stocks.

About NexPoint Real Estate Finance

NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.

About Cherry Hill Mortgage Investment

Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Cherry Hill Mortgage Investment Corporation was incorporated in 2012 and is based in Farmingdale, New Jersey.