MFA Investment Analysis Report & Stock Research, MFA Financial, Inc.

Ockham's Rating/Recommendation Summary

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MFA Revenue

Cash earnings is the most important factor in our analysis, but it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, MFA the high and low end of the Price to Sales per share ratios are 4.86x and 2.79x respectively.

Notice that MFA's current Price to Sales per share ratio is 3.75x, which is somewhat below its historical weighted average by 2%. Given this level of sales per share, we suggest a neutral share price forecast. To the extent there is a further drop in the Price to Sales ratio from current levels, which would occur through some combination of increased sales per share or a decline in share price, we would only become more positive about the Price to Sales ratio outlook.

MFA Cash Earnings

Looking at MFA specifically in their Cash Earnings capabilities, Ockham views MFA as significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for MFA, the current level of Cash Earnings compared to its historical levels helps identify where MFA is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 47.15 and a historical low Cash Earnings per share ratio of 25.66, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for MFA? From the Ockham perspective, we are looking specifically at MFA to see if the market is recognizing the huge disparity between MFA's past stock price to Cash Earnings ratio to today's levels. At a difference of 79% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at MFA. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

MFA Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from MFA against the historic high and low levels over an available data range. Because MFA has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In MFA’s case, the estimated annual dividend is $1.08 producing a current dividend yield of 15.00%. The highest dividend yield from MFA in recent history was 19.93% while the lowest dividend yield was 2.46%. It's hard not to notice that MFA pays a current dividend yield that is 33.99% above the historical median. This peaks our interest since our analysis looks favorably upon dividend yields that are greater than the historical median.