Arlington Asset Investment Corp (NYSE: AI) and UBS AG (NYSE:UBS) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, risk, institutional ownership, valuation and profitability.

Institutional and Insider Ownership

42.4% of Arlington Asset Investment Corp shares are held by institutional investors. Comparatively, 26.3% of UBS AG shares are held by institutional investors. 2.7% of Arlington Asset Investment Corp shares are held by company insiders. Comparatively, 1.0% of UBS AG shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 16.7%. UBS AG pays an annual dividend of $0.60 per share and has a dividend yield of 3.5%. Arlington Asset Investment Corp pays out -146.7% of its earnings in the form of a dividend. UBS AG pays out 56.6% 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. UBS AG has increased its dividend for 4 consecutive years. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Arlington Asset Investment Corp has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, UBS AG has a beta of 1.24, indicating that its stock price is 24% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for Arlington Asset Investment Corp and UBS AG, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arlington Asset Investment Corp 0 2 2 0 2.50
UBS AG 1 4 6 0 2.45

Arlington Asset Investment Corp presently has a consensus target price of $14.94, indicating a potential upside of 13.51%. Given Arlington Asset Investment Corp’s stronger consensus rating and higher possible upside, equities analysts clearly believe Arlington Asset Investment Corp is more favorable than UBS AG.

Profitability

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

Net Margins Return on Equity Return on Assets
Arlington Asset Investment Corp -33.84% -10.44% -0.93%
UBS AG 11.09% 7.80% 0.46%

Earnings and Valuation

This table compares Arlington Asset Investment Corp and UBS AG’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arlington Asset Investment Corp $45.40 million 7.52 -$38.93 million ($1.50) -8.77
UBS AG $29.91 billion 2.12 $3.94 billion $1.06 16.11

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

Summary

UBS AG beats Arlington Asset Investment Corp on 9 of the 16 factors compared between the two stocks.

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.

About UBS AG

UBS Group AG is a holding company and conducts its operations through UBS AG and its subsidiaries. The Company comprises Corporate Center and five business divisions: Wealth Management, Wealth Management Americas, Personal & Corporate Banking, Asset Management and the Investment Bank. Wealth Management division provides advice and tailored financial services to wealthy private clients around the world, except those served by Wealth Management Americas. Wealth Management Americas division is a wealth manager in the Americas in terms of financial advisor productivity and invested assets by financial advisor. Personal & Corporate Banking division provides financial products and services to private, corporate and institutional clients in Switzerland. Asset Management division provides investment management products and services, platform solutions and advisory support. Investment Bank division provides investment advice, financial solutions and capital markets access.

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