Northern Trust Corporation (NASDAQ: NTRS) and Arlington Asset Investment Corp (NYSE:AI) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, dividends, institutional ownership, risk, profitabiliy, analyst recommendations and valuation.

Dividends

Northern Trust Corporation pays an annual dividend of $1.52 per share and has a dividend yield of 1.7%. Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 16.0%. Northern Trust Corporation pays out 34.5% of its earnings in the form of a dividend. Arlington Asset Investment Corp pays out -1,100.0% 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. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Northern Trust Corporation and Arlington Asset Investment Corp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Northern Trust Corporation $5.09 billion 3.96 $1.01 billion $4.40 19.96
Arlington Asset Investment Corp $53.14 million 6.13 -$4.73 million ($0.20) -68.90

Northern Trust Corporation has higher revenue and earnings than Arlington Asset Investment Corp. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Northern Trust Corporation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Northern Trust Corporation and Arlington Asset Investment Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northern Trust Corporation 20.21% 12.08% 0.88%
Arlington Asset Investment Corp -4.51% -1.78% -0.17%

Analyst Recommendations

This is a summary of current recommendations and price targets for Northern Trust Corporation and Arlington Asset Investment Corp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northern Trust Corporation 1 5 3 1 2.40
Arlington Asset Investment Corp 0 2 1 0 2.33

Northern Trust Corporation currently has a consensus price target of $95.10, indicating a potential upside of 8.27%. Arlington Asset Investment Corp has a consensus price target of $16.00, indicating a potential upside of 16.11%. Given Arlington Asset Investment Corp’s higher possible upside, analysts clearly believe Arlington Asset Investment Corp is more favorable than Northern Trust Corporation.

Institutional & Insider Ownership

82.9% of Northern Trust Corporation shares are held by institutional investors. Comparatively, 42.7% of Arlington Asset Investment Corp shares are held by institutional investors. 1.3% of Northern Trust Corporation shares are held by insiders. Comparatively, 2.7% of Arlington Asset Investment Corp shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

Northern Trust Corporation has a beta of 0.94, suggesting that its share price is 6% less volatile than the S&P 500. Comparatively, Arlington Asset Investment Corp has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500.

Summary

Northern Trust Corporation beats Arlington Asset Investment Corp on 10 of the 16 factors compared between the two stocks.

About Northern Trust Corporation

Northern Trust Corporation is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals across the world. Its segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The C&IS segment is a provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds and other institutional investors around the globe. The Wealth Management segment provides trust, investment management, custody and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services, and private and business banking. It conducts its business through various subsidiaries.

About Arlington Asset Investment Corp

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

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