Bank Of New York Mellon Corporation (The) (NYSE: BK) and Arlington Asset Investment Corp (NYSE:AI) are both investment management & fund operators – nec companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, profitability, institutional ownership, dividends and earnings.

Profitability

This table compares Bank Of New York Mellon Corporation (The) and Arlington Asset Investment Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank Of New York Mellon Corporation (The) 23.14% 10.51% 1.11%
Arlington Asset Investment Corp -27.20% -8.36% -0.72%

Earnings and Valuation

This table compares Bank Of New York Mellon Corporation (The) and Arlington Asset Investment Corp’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Bank Of New York Mellon Corporation (The) $15.67 billion 3.43 $3.55 billion $3.40 15.43
Arlington Asset Investment Corp $105.34 million 3.06 -$41.34 million ($1.46) -7.86

Bank Of New York Mellon Corporation (The) has higher revenue and earnings than Arlington Asset Investment Corp. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Bank Of New York Mellon Corporation (The), indicating that it is currently the more affordable of the two stocks.

Dividends

Bank Of New York Mellon Corporation (The) pays an annual dividend of $0.96 per share and has a dividend yield of 1.8%. Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 19.2%. Bank Of New York Mellon Corporation (The) pays out 28.2% of its earnings in the form of a dividend. Arlington Asset Investment Corp pays out -150.7% 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. Arlington Asset Investment Corp has increased its dividend for 4 consecutive years. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Bank Of New York Mellon Corporation (The) has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500. Comparatively, Arlington Asset Investment Corp has a beta of 1.06, meaning that its share price is 6% more volatile than the S&P 500.

Institutional & Insider Ownership

82.7% of Bank Of New York Mellon Corporation (The) shares are held by institutional investors. Comparatively, 38.1% of Arlington Asset Investment Corp shares are held by institutional investors. 3.6% of Bank Of New York Mellon Corporation (The) shares are held by company insiders. Comparatively, 5.9% of Arlington Asset Investment Corp shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings for Bank Of New York Mellon Corporation (The) and Arlington Asset Investment Corp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank Of New York Mellon Corporation (The) 2 9 4 1 2.25
Arlington Asset Investment Corp 0 1 2 0 2.67

Bank Of New York Mellon Corporation (The) presently has a consensus target price of $54.88, suggesting a potential upside of 4.58%. Arlington Asset Investment Corp has a consensus target price of $13.75, suggesting a potential upside of 19.88%. Given Arlington Asset Investment Corp’s stronger consensus rating and higher possible upside, analysts clearly believe Arlington Asset Investment Corp is more favorable than Bank Of New York Mellon Corporation (The).

Summary

Bank Of New York Mellon Corporation (The) beats Arlington Asset Investment Corp on 11 of the 17 factors compared between the two stocks.

About Bank Of New York Mellon Corporation (The)

The Bank of New York Mellon Corporation is an investments company. The Company operates businesses through two segments: Investment Management and Investment Services. The Company also has an Other segment, which includes the leasing portfolio, corporate treasury activities (including its investment securities portfolio), derivatives and other trading, corporate and bank-owned life insurance and renewable energy investments, and business exits. As of December 31, 2016, the Company had $29.9 trillion in assets under custody and/or administration and $1.6 trillion in assets under management. The Company’s Investment Management boutiques offer a range of actively managed equity, fixed income, alternative and liability-driven investments, along with passive products and cash management. The Company offers asset servicing, clearing services, issuer services and treasury services to its clients.

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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