Franklin Resources (NYSE: BEN) and Arlington Asset Investment Corp (NYSE:AI) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Analyst Recommendations

This is a breakdown of current recommendations for Franklin Resources and Arlington Asset Investment Corp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Franklin Resources 3 6 1 0 1.80
Arlington Asset Investment Corp 0 2 2 0 2.50

Franklin Resources presently has a consensus price target of $42.22, suggesting a potential downside of 1.85%. Arlington Asset Investment Corp has a consensus price target of $14.94, suggesting a potential upside of 14.64%. Given Arlington Asset Investment Corp’s stronger consensus rating and higher probable upside, analysts plainly believe Arlington Asset Investment Corp is more favorable than Franklin Resources.

Valuation and Earnings

This table compares Franklin Resources and Arlington Asset Investment Corp’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Franklin Resources $6.39 billion 3.75 $2.31 billion $3.06 14.06
Arlington Asset Investment Corp $45.40 million 7.45 -$38.93 million ($1.50) -8.69

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

Dividends

Franklin Resources pays an annual dividend of $0.80 per share and has a dividend yield of 1.9%. Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 16.9%. Franklin Resources pays out 26.1% of its earnings in the form of a dividend. Arlington Asset Investment Corp pays out -146.7% 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. Franklin Resources has increased its dividend for 35 consecutive years. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Franklin Resources and Arlington Asset Investment Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Franklin Resources 27.30% 13.96% 10.41%
Arlington Asset Investment Corp -33.84% -10.44% -0.93%

Risk & Volatility

Franklin Resources has a beta of 1.73, indicating that its stock price is 73% more volatile than the S&P 500. Comparatively, Arlington Asset Investment Corp has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500.

Insider & Institutional Ownership

45.7% of Franklin Resources shares are held by institutional investors. Comparatively, 42.4% of Arlington Asset Investment Corp shares are held by institutional investors. 21.6% of Franklin Resources shares are held by company insiders. Comparatively, 2.7% of Arlington Asset Investment Corp shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Franklin Resources beats Arlington Asset Investment Corp on 10 of the 16 factors compared between the two stocks.

Franklin Resources Company Profile

Franklin Resources, Inc. is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. It is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. Its products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). It offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts. Its investment funds include the United States-registered funds, non-United States-registered funds and unregistered funds.

Arlington Asset Investment Corp Company Profile

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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