Head-To-Head Review: City Office REIT (NYSE:CIO) versus MFA Financial (NYSE:MFA)

MFA Financial (NYSE:MFA) and City Office REIT (NYSE:CIO) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, earnings, risk, dividends, valuation, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent recommendations for MFA Financial and City Office REIT, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFA Financial	0	2	4	0	2.67
City Office REIT	0	1	0	0	2.00

MFA Financial currently has a consensus price target of $12.00, suggesting a potential upside of 13.85%. Given MFA Financial’s stronger consensus rating and higher possible upside, equities analysts clearly believe MFA Financial is more favorable than City Office REIT.

Dividends

MFA Financial pays an annual dividend of $1.40 per share and has a dividend yield of 13.3%. City Office REIT pays an annual dividend of $0.40 per share and has a dividend yield of 8.2%. MFA Financial pays out -1,749.8% of its earnings in the form of a dividend. City Office REIT pays out -142.9% 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. MFA Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares MFA Financial and City Office REIT’s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFA Financial	$605.60 million	1.78	$80.16 million	($0.08)	-131.73
City Office REIT	$177.63 million	1.11	-$2.68 million	($0.28)	-17.50

MFA Financial has higher revenue and earnings than City Office REIT. MFA Financial is trading at a lower price-to-earnings ratio than City Office REIT, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares MFA Financial and City Office REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFA Financial	4.70%	9.66%	1.76%
City Office REIT	-2.24%	-0.60%	-0.26%

Risk and Volatility

MFA Financial has a beta of 2.15, suggesting that its stock price is 115% more volatile than the S&P 500. Comparatively, City Office REIT has a beta of 1.94, suggesting that its stock price is 94% more volatile than the S&P 500.

Institutional & Insider Ownership

65.3% of MFA Financial shares are held by institutional investors. Comparatively, 67.5% of City Office REIT shares are held by institutional investors. 0.7% of MFA Financial shares are held by insiders. Comparatively, 3.9% of City Office REIT 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.

Summary

MFA Financial beats City Office REIT on 13 of the 16 factors compared between the two stocks.

About MFA Financial

MFA Financial, Inc., together with its subsidiaries, operates as a real estate investment trust in the United States. It invests in residential mortgage securities, including non-agency mortgage-backed securities, agency MBS, and credit risk transfer securities; residential whole loans, including purchased performing loans, purchased credit deteriorated, and non-performing loans; and mortgage servicing rights related assets. The company was incorporated in 1997 and is based in New York, New York.

About City Office REIT

City Office REIT is an internally-managed real estate company focused on acquiring, owning and operating high-quality office properties located predominantly in Sun Belt markets. City Office currently owns or has a controlling interest in 5.7 million square feet of office properties. The Company has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.