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Orchid Island Capital (ORC)
NYSE:ORC
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Orchid Island Capital
(NYSE:ORC)
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Rating:57Neutral
Price Target:
$8.00
â–²(9.74% Upside)
Action:ReiteratedDate:02/21/26
The score is held back mainly by balance-sheet risk (very high leverage) and inconsistent historical financial performance, despite a strong 2025 rebound. Valuation is supportive with a low P/E and very high yield, while technicals are currently weak and the latest earnings call was net-positive but acknowledged meaningful prepayment and funding risks.
Positive Factors
Strong 2025 earnings & cash recovery
Orchid delivered a material operational recovery in 2025: revenue and net income surged and free cash flow improved to match net income. This stronger, cash-backed earnings profile enhances the firm's ability to fund dividends, rebuild equity, and support portfolio growth over the medium term.
Disciplined, well-timed portfolio acquisitions
Management executed large, opportunistic buys when spreads were wide, increasing scale and embedding higher prospective carry into the portfolio. Well-timed acquisition discipline can sustainably boost long-term return potential as those acquisitions amortize and generate excess spread versus funding cost.
Defensive hedging and low portfolio duration
A low-duration portfolio combined with sizable pay-fixed swaps and substantial hedge coverage reduces sensitivity to sharp rate moves and repo volatility. This defensive structure improves the firm's ability to preserve book value and stabilize net interest margin through adverse rate scenarios.
Negative Factors
Very high leverage
An elevated debt-to-equity ratio materially amplifies balance-sheet sensitivity to funding cost shifts and asset-price moves. With most funding via short-term repo, the high leverage reduces financial flexibility, increasing the risk of forced deleveraging or earnings pressure if repo availability or spreads tighten.
Elevated prepayment risk
Rising CPRs, especially on 6%+ coupons, erode expected carry and shorten cash flows, compressing long-term yields on specified pools. Persistent elevated prepayments can structurally depress net interest spread and reduce the predictability of income and dividend coverage absent offsetting positioning or hedges.
Inconsistent historical cash flow and profitability
Despite the 2025 rebound, Orchid's earnings and cash flows have been highly cyclical with periods of losses and weak operating cash generation. This historical inconsistency raises uncertainty about sustaining dividends and earnings through different rate, prepayment, and repo cycles over the medium term.
Orchid Island Capital (ORC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.14B
Dividend Yield20.03%
Average Volume (3M)6.52M
Price to Earnings (P/E)6.1
Beta (1Y)0.69
Revenue Growth72.30%
EPS Growth-54.02%
CountryUS
EmployeesN/A
SectorReal Estate
Sector Strength53
IndustryREIT - Mortgage
Share Statistics
EPS (TTM)0.19
Shares Outstanding151,712,160
10 Day Avg. Volume5,049,464
30 Day Avg. Volume6,523,267
Financial Highlights & Ratios
PEG Ratio0.05
Price to Book (P/B)0.67
Price to Sales (P/S)1.90
P/FCF Ratio7.67
Enterprise Value/Market Cap9.34
Enterprise Value/Revenue52.70
Enterprise Value/Gross Profit98.10
Enterprise Value/Ebitda326.63
Forecast
1Y Price Target
$7.50Price Target Upside2.88% Upside
Rating ConsensusHold
Number of Analyst Covering1
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Orchid Island Capital Business Overview & Revenue Model
Company DescriptionOrchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company's RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company qualifies as a real estate investment trust for federal income tax purposes. Orchid Island Capital, Inc. was incorporated in 2010 and is based in Vero Beach, Florida.
How the Company Makes MoneyOrchid Island Capital generates revenue primarily through the interest income earned on its mortgage-backed securities portfolio. The company invests in both agency RMBS, which are guaranteed by government-sponsored entities, and non-agency RMBS, which are not backed by any government guarantees. The interest income is supplemented by potential capital appreciation of its securities and gains from trading activities. Additionally, the company may utilize leverage to enhance returns on its investments, borrowing against its securities to increase its investment capacity. Significant partnerships with financial institutions and mortgage servicers may also contribute to its earnings, as these relationships can provide access to a broader range of investment opportunities and market insights.
Orchid Island Capital Earnings Call Summary
Earnings Call Date:Jan 29, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 23, 2026
Earnings Call Sentiment Positive
The call presented a predominately positive operational and financial picture: strong Q4 earnings and EPS growth, significant balance-sheet and portfolio expansion executed when spreads were wide, materially improved expense ratio and funding costs, and disciplined hedging and liquidity management. The management team also acknowledged and is actively managing headwinds — notably elevated prepayment speeds (especially on higher coupons), short-term funding volatility at year-end, and policy/technical uncertainty related to potential GSE activity — which could moderate near-term earnings. On balance the positives (growth, earnings, improved costs, and defensive positioning) outweigh the risks discussed.Q4-2025 Updates
Positive Updates
Strong Quarterly Earnings and EPS Growth
Net income for Q4 was $103.4 million, equating to $0.62 per share versus $0.53 in Q3 (≈+17% QoQ). Total return for the quarter was 7.8% (vs. 6.7% in Q3).
Book Value and Equity Growth
Book value increased to $7.54 at quarter-end from $7.33 at the end of Q3 (+$0.21, ≈+2.9%). Stockholders' equity ended Q4 at approximately $1.4 billion.
Material Portfolio and Balance Sheet Growth
Average MBS holdings rose to $9.5 billion (actual balance $10.6 billion), up from $7.7 billion in Q3 — approximately +27% growth in quarter. Company roughly doubled in size over 2025 (shareholders' equity and total assets +~100% year-over-year).
Disciplined, Well-Timed Acquisitions
Q4 purchases of agency specified pools totaled $3.2 billion (breakdown: $892M Fannie 5s; $1.5B Fannie 5.5s; $600M Fannie 6s; $283M Fannie 6.5s). Over ~2025 they completed $7.4B of acquisitions with ~75% executed when a Morgan Stanley spread index was >100 bps (weighted average spread at time of acquisitions ~108 bps), enhancing long-term return potential.
Improved Funding Costs and Liquidity
Average repo rate declined from 4.33% at the start of the quarter to 3.98% at quarter-end (−35 bps). Liquidity remained high (57.7% at quarter-end vs. 57.1% in Q3) aided by lower haircuts (~4%). Post-quarter SOFR settled in the ~3.63–3.65% range and repo spreads have trended toward ~14 bps, implying an expected repo roll yield around ~3.8% in coming months.
Lower Expense Ratio / Operating Leverage
G&A (including management fee) as a percentage of shareholders' equity ran at ~1.7% for 2025 — materially lower than the >5% peak during the tightening cycle and below the pre-COVID highs. Non-management expenses rose only modestly despite the business doubling in size, improving operating leverage.
Defensive Portfolio Positioning and Hedging
Portfolio duration remained low (≈2.08) and duration gap tightened to ~+0.17 years (from negative earlier), reflecting a shift to higher coupon, lower-duration pools. Hedge notional remained stable; 69% of outstanding repo was hedged (vs. 70% Q3). Net additions to pay-fixed swaps totaled roughly $950M (predominantly 3-year pay-fixed) to protect against downside rate scenarios.
Dividend Coverage and Distribution Policy
Monthly dividend maintained at $0.12 (quarterly $0.36). For 2025 ~95% of dividends were derived from taxable income (≈5% return of capital), indicating the company distributed substantially all taxable income while maintaining the dividend.
Negative Updates
Rising Prepayment Speeds
Prepayment speeds rose to 15.7% in Q4 from 10.1% in Q3 (an increase of ~5.6 percentage points, or roughly +55% relative), driven particularly by higher-coupon pools (6%+). Higher speeds reduced carry and trimmed yields on affected positions.
Short-Term Funding Pressure at Year-End
Repo spreads widened into the low-to-mid 20 bps area approaching year-end, briefly increasing funding costs and pressure before improving post-year-end. This created some near-term funding cost volatility.
Lower Sensitivity to Further Spread Tightening
Strategic shift into production/premium coupons (5%–6.5%) reduced spread duration and interest-rate sensitivity — while defensive, this profile benefits less from additional mortgage spread tightening and has produced modestly lagging relative performance vs. some peers after the January GSE announcement.
Market Technical / Policy Uncertainty
Potential for increased GSE purchases (referenced up to $200B) and uncertainty around Fed actions create ambiguity in future supply/demand dynamics; if supply increases materially, it could pressure mortgage relative performance and delay gains in some coupon segments.
Mortgages Less Attractive vs. Prior Year
Although MBS spreads tightened (current-coupon to 10-year at ~80 bps), mortgage rates available to borrowers remain north of 6%, and overall mortgage market attractiveness is diminished compared with a year ago, limiting upside from additional spread moves without funding/rate support.
Rising DVO1 and Slightly Increased Interest-Rate Sensitivity
DVO1 moved from ~122,000 (12/31) to ~178,000 recently (increase of ~56,000), indicating increased dollar value of a one-basis-point move; while hedged, this is a metric to monitor for rate-shock scenarios.
Potential Earnings Compression if Speeds Accelerate
If prepayment speeds accelerate materially beyond expectations, the company — despite call-protected specified pools and moderate premiums — could see compressed earnings and lower carry, particularly on higher-coupon pools that showed higher near-term CPRs.
Company Guidance
Management guided a defensive-but-constructive outlook: Q4 results included $103.4M net income ($0.62/share), book value $7.54 (up from $7.33), shareholders’ equity ~ $1.4B, Q4 dividend of $0.36 (12¢/month) and total return of 7.8% (vs 6.7% in Q3); the company ended Q4 with average MBS of $9.5B (actual balance $10.6B, ~27% QoQ growth), leverage 7.4%, liquidity 57.7% (vs 57.1% Q3), and prepayment speeds of 15.7% (10.1% Q3). Portfolio & funding guidance: purchases in Q4 totaled $3.2B of specified pools (≈$892M Fannie 5s, $1.5B 5.5s, $600M 6s, $283M 6.5s) at modeled yields in the low-5% range, WA coupon rose to ~5.64, OAS for 5–6.5s tightened to ~50–60 bps, and the firm noted 75% of $7.4B of 2025 acquisitions occurred when spreads averaged ~108 bps; funding costs improved (repo rates fell from 4.33% to 3.98%, SOFR in the mid-3.6s, repo spreads trending to ~14 bps) and the company expects repo funding to turnover around a ~3.8% rate. Risk positioning/guidance: hedges equal ~69% of repo notional, DVO1 rose from 122k at 12/31 to ~178k, portfolio duration is low (~2.08) with a small positive duration gap (~0.17 currently), the firm added ~$950M pay-fixed swaps ($800M 3y, $90M 5y, $75M 7y) and TBA shorts in 5–6.5 coupons, expects prepayment speeds to moderate (improving carry), sees potential for further MBS tightening if GSE activity/technicals persist but is positioned defensively for a bear‑steepening/rate shock, and reiterated a 2025 expense ratio of ~1.7% with continued discipline on G&A.Orchid Island Capital Financial Statement Overview
Summary
Income and cash flow rebounded strongly in 2025 (revenue and net income up sharply; free cash flow improved and broadly supported earnings), but durability is weakened by multi-year volatility and an exceptionally levered balance sheet (debt-to-equity ~7.5x), which raises sensitivity to funding and asset-value moves.Income Statement
Results improved sharply in 2025 with revenue jumping to ~$485.2M (up ~505% year over year) and net income rising to ~$159.0M (net margin ~32.8%), signaling a strong rebound from prior loss years (2021–2023) and a smaller-scale 2024. That said, profitability and revenue have been highly volatile across the cycle (including negative revenue and losses in multiple years), which lowers confidence in the durability of the earnings profile despite the strong latest year.58
Neutral
Balance Sheet
Leverage is the key weakness. In 2025, total debt rose to ~$10.24B against ~$1.37B of equity (debt-to-equity ~7.47x), implying meaningful balance-sheet risk and sensitivity to funding/asset-value moves typical for mortgage REITs. While 2025 return on equity improved to ~11.6%, the sharp shift from prior years with materially lower/negative returns and the elevated leverage profile weigh on overall balance-sheet quality.32
Negative
Cash Flow
Cash generation improved in 2025 with operating cash flow and free cash flow of ~$120.4M, up ~34% year over year, and free cash flow matching net income (1.0x), suggesting reported earnings were backed by cash in the latest period. However, cash flow has been inconsistent historically (including very low operating cash flow in 2023), and the provided operating cash flow coverage figure is very low in 2025 (~0.012), pointing to limited cash buffer versus the company’s funding/debt structure.46
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 485.24M | 54.41M | -20.70M | -241.00M | -49.89M |
| Gross Profit | 464.76M | 54.41M | -20.70M | -243.88M | -49.89M |
| EBITDA | 464.76M | 0.00 | 0.00 | 0.00 | 0.00 |
| Net Income | 159.03M | 37.66M | -39.23M | -258.45M | -64.76M |
Balance Sheet | |||||
| Total Assets | 11.68B | 5.72B | 4.26B | 3.87B | 7.07B |
| Cash, Cash Equivalents and Short-Term Investments | 724.56M | 309.33M | 241.03M | 205.65M | 385.14M |
| Total Debt | 10.24B | 0.00 | 0.00 | 0.00 | 0.00 |
| Total Liabilities | 10.30B | 5.05B | 3.80B | 3.43B | 6.30B |
| Stockholders Equity | 1.37B | 668.50M | 469.94M | 438.76M | 768.10M |
Cash Flow | |||||
| Free Cash Flow | 120.45M | 66.99M | 8.00M | 289.37M | 96.44M |
| Operating Cash Flow | 120.45M | 66.99M | 8.00M | 289.37M | 96.44M |
| Investing Cash Flow | -5.38B | -1.42B | -441.06M | 2.44B | -3.02B |
| Financing Cash Flow | 5.65B | 1.48B | 396.13M | -2.94B | 3.07B |
Orchid Island Capital Technical Analysis
Positive
7.29
Price Trends
7.50
Positive
7.20
Positive
6.76
Positive
Market Momentum
-0.03
Positive
48.26
Neutral
59.97
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ORC, the sentiment is Positive. The current price of 7.29 is below the 20-day moving average (MA) of 7.72, below the 50-day MA of 7.50, and above the 200-day MA of 6.76, indicating a neutral trend. The MACD of -0.03 indicates Positive momentum. The RSI at 48.26 is Neutral, neither overbought nor oversold. The STOCH value of 59.97 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ORC.
Orchid Island Capital Risk Analysis
Orchid Island Capital disclosed 72 risk factors in its most recent earnings report. Orchid Island Capital reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Orchid Island Capital Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | $1.03B | 7.75 | 9.59% | 14.90% | 5.52% | -47.72% | |
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% | |
60 Neutral | $1.58B | 9.59 | 9.23% | 11.37% | 70.94% | 2.95% | |
57 Neutral | $1.14B | 6.08 | 15.59% | 20.03% | 72.30% | -54.02% | |
55 Neutral | $1.08B | 12.61 | 6.67% | 12.69% | -15.48% | -36.45% | |
53 Neutral | $1.15B | 8.01 | 9.04% | 11.40% | 9.46% | -111.44% | |
45 Neutral | $1.18B | -2.29 | -23.25% | 14.29% | 22.48% | 50.49% |
* Real Estate Sector Average
ORC
Orchid Island Capital
7.58
0.32
4.34%
CIM
Chimera Investment
13.54
0.90
7.09%
EFC
Ellington Financial
12.37
0.71
6.06%
MFA
MFA Financial
10.06
0.82
8.85%
TWO
Two Harbors
10.78
-1.24
-10.33%
PMT
PennyMac Mortgage
12.29
-0.13
-1.05%
Orchid Island Capital Corporate Events
DividendsFinancial Disclosures
Orchid Island Capital Declares Monthly Dividend, Sets Earnings Dates
Positive
Jan 7, 2026
On January 7, 2026, Orchid Island Capital declared a monthly cash dividend of $0.12 per share for January 2026, payable on February 26, 2026 to shareholders of record as of January 30, 2026, and indicated it intends to continue making regular monthly distributions in line with REIT requirements, while cautioning that no minimum payout level is assured. The company also scheduled the release of its estimated fourth-quarter 2025 results and RMBS portfolio metrics for January 14, 2026, with full year-end and fourth-quarter 2025 results due January 29, 2026, signaling upcoming visibility into performance and portfolio positioning that will be closely watched by income-focused investors and other stakeholders amid its leveraged agency RMBS strategy.
The most recent analyst rating on (ORC) stock is a Hold with a $7.50 price target. To see the full list of analyst forecasts on Orchid Island Capital stock, see the ORC Stock Forecast page.
Dividends
Orchid Island Capital Declares December 2025 Dividend
Neutral
Dec 10, 2025
On December 9, 2025, Orchid Island Capital announced a monthly cash dividend of $0.12 per share for December 2025, payable on January 29, 2026. The company also provided details of its RMBS portfolio as of November 30, 2025. This announcement reflects Orchid Island Capital’s ongoing commitment to regular monthly distributions to its stockholders, aligning with its status as a real estate investment trust (REIT) that must distribute at least 90% of its taxable income annually.
The most recent analyst rating on (ORC) stock is a Hold with a $8.00 price target. To see the full list of analyst forecasts on Orchid Island Capital stock, see the ORC Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.