Comparing Charles Schwab (NYSE:SCHW) & Bank of America (NYSE:BAC)

Bank of America (NYSE:BAC) and Charles Schwab (NYSE:SCHW) are both large-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Profitability

This table compares Bank of America and Charles Schwab’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of America	16.23%	11.07%	0.90%
Charles Schwab	35.93%	21.02%	1.86%

Dividends

Bank of America pays an annual dividend of $1.12 per share and has a dividend yield of 2.1%. Charles Schwab pays an annual dividend of $1.08 per share and has a dividend yield of 1.0%. Bank of America pays out 29.2% of its earnings in the form of a dividend. Charles Schwab pays out 25.3% 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. Bank of America has increased its dividend for 11 consecutive years and Charles Schwab has increased its dividend for 1 consecutive years. Bank of America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

70.7% of Bank of America shares are owned by institutional investors. Comparatively, 84.4% of Charles Schwab shares are owned by institutional investors. 0.3% of Bank of America shares are owned by company insiders. Comparatively, 6.3% of Charles Schwab shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and target prices for Bank of America and Charles Schwab, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of America	0	4	24	1	2.90
Charles Schwab	1	5	17	1	2.75

Bank of America currently has a consensus target price of $59.74, suggesting a potential upside of 12.67%. Charles Schwab has a consensus target price of $114.45, suggesting a potential upside of 10.23%. Given Bank of America’s stronger consensus rating and higher probable upside, analysts clearly believe Bank of America is more favorable than Charles Schwab.

Volatility & Risk

Bank of America has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500. Comparatively, Charles Schwab has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Valuation and Earnings

This table compares Bank of America and Charles Schwab”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of America	$191.57 billion	2.02	$30.51 billion	$3.83	13.84
Charles Schwab	$19.61 billion	9.41	$5.94 billion	$4.27	24.32

Bank of America has higher revenue and earnings than Charles Schwab. Bank of America is trading at a lower price-to-earnings ratio than Charles Schwab, indicating that it is currently the more affordable of the two stocks.

Summary

Charles Schwab beats Bank of America on 9 of the 17 factors compared between the two stocks.

About Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.

About Charles Schwab

The Charles Schwab Corporation, together with its subsidiaries, operates as a savings and loan holding company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services in the United States and internationally. The company operates in two segments, Investor Services and Advisor Services. It offers brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities, including certificates of deposit; third-party mutual funds through the Mutual Fund Marketplace and Mutual Fund OneSource service, as well as mutual fund trading and clearing services to broker-dealers; exchange-traded funds; advisory solutions for managed portfolios, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management; banking products comprising checking and savings accounts, first lien residential real estate mortgage loans, home equity lines of credit, and pledged asset lines; and trust custody services, personal trust reporting services, and administrative trustee services. It also provides digital retirement calculators; integrated web-, mobile-, and software-based trading platforms, real-time market data, options trading, premium research, and multi-channel access; self-service education and support tools; online research and analysis tools; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; retirement plan services; mutual fund clearing services; and advisor services, including interactive tools and educational content. The Company operates through branch offices. The Charles Schwab Corporation was incorporated in 1971 and is headquartered in Westlake, Texas.