KKR Real Estate Finance Trust (KREF) versus Annaly Capital Management (NLY) Critical Analysis

KKR Real Estate Finance Trust (NYSE: KREF) and Annaly Capital Management (NYSE:NLY) are both financials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, earnings, valuation, profitability, risk and dividends.

Profitability

This table compares KKR Real Estate Finance Trust and Annaly Capital Management’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%
Annaly Capital Management 104.56% 11.59% 1.52%

Insider and Institutional Ownership

64.8% of KKR Real Estate Finance Trust shares are owned by institutional investors. Comparatively, 55.5% of Annaly Capital Management shares are owned by institutional investors. 0.4% of Annaly Capital Management shares are owned by 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.

Earnings and Valuation

This table compares KKR Real Estate Finance Trust and Annaly Capital Management’s gross 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 25.24 $31.15 million $1.04 18.62
Annaly Capital Management $2.21 billion 5.48 $1.43 billion $2.50 4.18

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

Dividends

KKR Real Estate Finance Trust pays an annual dividend of $1.48 per share and has a dividend yield of 7.6%. Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 11.5%. KKR Real Estate Finance Trust pays out 142.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management pays out 48.0% of its earnings in the form of a dividend. Annaly Capital Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings and price targets for KKR Real Estate Finance Trust and Annaly Capital Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KKR Real Estate Finance Trust 1 2 1 0 2.00
Annaly Capital Management 0 4 2 0 2.33

KKR Real Estate Finance Trust currently has a consensus target price of $22.50, indicating a potential upside of 16.22%. Annaly Capital Management has a consensus target price of $11.63, indicating a potential upside of 11.24%. Given KKR Real Estate Finance Trust’s higher probable upside, research analysts plainly believe KKR Real Estate Finance Trust is more favorable than Annaly Capital Management.

Summary

Annaly Capital Management beats KKR Real Estate Finance Trust on 11 of the 15 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 Annaly Capital Management

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

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