State Street Corporation (NYSE: STT) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, valuation, earnings, profitability and risk.

Dividends

State Street Corporation pays an annual dividend of $1.68 per share and has a dividend yield of 1.7%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. State Street Corporation pays out 31.1% of its earnings in the form of a dividend. Legg Mason pays out 46.5% 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. State Street Corporation has raised its dividend for 6 consecutive years and Legg Mason has raised its dividend for 7 consecutive years. Legg Mason is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares State Street Corporation and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
State Street Corporation 19.97% 12.49% 0.95%
Legg Mason 8.21% 6.84% 3.35%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for State Street Corporation and Legg Mason, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
State Street Corporation 1 9 3 1 2.29
Legg Mason 3 2 4 0 2.11

State Street Corporation currently has a consensus price target of $94.08, indicating a potential downside of 5.14%. Legg Mason has a consensus price target of $42.75, indicating a potential upside of 9.22%. Given Legg Mason’s higher possible upside, analysts plainly believe Legg Mason is more favorable than State Street Corporation.

Volatility & Risk

State Street Corporation has a beta of 1.31, suggesting that its stock price is 31% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.22, suggesting that its stock price is 122% more volatile than the S&P 500.

Institutional & Insider Ownership

87.4% of State Street Corporation shares are held by institutional investors. Comparatively, 82.3% of Legg Mason shares are held by institutional investors. 0.7% of State Street Corporation shares are held by insiders. Comparatively, 12.7% of Legg Mason shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares State Street Corporation and Legg Mason’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
State Street Corporation $10.63 billion 3.49 $2.02 billion $5.40 18.36
Legg Mason $2.98 billion 1.23 $572.31 million $2.41 16.24

State Street Corporation has higher revenue and earnings than Legg Mason. Legg Mason is trading at a lower price-to-earnings ratio than State Street Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

State Street Corporation beats Legg Mason on 11 of the 18 factors compared between the two stocks.

State Street Corporation Company Profile

State Street Corporation is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. Investment servicing line of business performs functions, such as providing institutional investors with clearing, settlement and payment services. The Company operates investment management line of business through State Street Global Advisors (SSGA). SSGA provides a range of investment management, investment research and investment advisory services to corporations, public funds and other investors. Its clients include mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers.

Legg Mason Company Profile

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

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