Analyzing Bank of New York Mellon (NYSE:BNY) and Federated Hermes (NYSE:FHI)

Federated Hermes (NYSE:FHI) and Bank of New York Mellon (NYSE:BNY) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Valuation and Earnings

This table compares Federated Hermes and Bank of New York Mellon”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federated Hermes	$1.80 billion	2.40	$403.30 million	$5.38	10.76
Bank of New York Mellon	$40.76 billion	2.50	$5.55 billion	$8.59	17.48

Bank of New York Mellon has higher revenue and earnings than Federated Hermes. Federated Hermes is trading at a lower price-to-earnings ratio than Bank of New York Mellon, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Federated Hermes has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500. Comparatively, Bank of New York Mellon has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500.

Profitability

This table compares Federated Hermes and Bank of New York Mellon’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federated Hermes	21.30%	34.03%	18.54%
Bank of New York Mellon	15.52%	16.00%	1.27%

Analyst Ratings

This is a summary of current recommendations and price targets for Federated Hermes and Bank of New York Mellon, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federated Hermes	1	4	2	1	2.38
Bank of New York Mellon	0	6	10	1	2.71

Federated Hermes presently has a consensus target price of $57.40, suggesting a potential downside of 0.86%. Bank of New York Mellon has a consensus target price of $156.73, suggesting a potential upside of 4.41%. Given Bank of New York Mellon’s stronger consensus rating and higher possible upside, analysts clearly believe Bank of New York Mellon is more favorable than Federated Hermes.

Institutional & Insider Ownership

75.9% of Federated Hermes shares are held by institutional investors. Comparatively, 85.3% of Bank of New York Mellon shares are held by institutional investors. 4.2% of Federated Hermes shares are held by company insiders. Comparatively, 0.2% of Bank of New York Mellon shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Federated Hermes pays an annual dividend of $1.52 per share and has a dividend yield of 2.6%. Bank of New York Mellon pays an annual dividend of $2.52 per share and has a dividend yield of 1.7%. Federated Hermes pays out 28.3% of its earnings in the form of a dividend. Bank of New York Mellon pays out 29.3% 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. Federated Hermes has raised its dividend for 4 consecutive years and Bank of New York Mellon has raised its dividend for 14 consecutive years. Federated Hermes is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Bank of New York Mellon beats Federated Hermes on 11 of the 17 factors compared between the two stocks.

About Federated Hermes

Federated Hermes, Inc. is a publicly owned investment manager. Through its subsidiaries, the firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, balanced and money market mutual funds along with separate client-focused equity, fixed income, money market, and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of small-cap, mid-cap, and large-cap companies. The firm makes its fixed income investments in ultra-short, short-term, and intermediate-term mortgage-backed, U.S. Government, U.S. corporate, high yield, and municipal securities. It employs both fundamental and quantitative analysis to make its equity investments. Federated Hermes, Inc. was founded in 1955 and is based in Pittsburgh, Pennsylvania with additional offices in New York City and London, United Kingdom.

About Bank of New York Mellon

The Bank of New York Mellon Corporation provides a range of financial products and services in the United States and internationally. The company operates through Securities Services, Market and Wealth Services, Investment and Wealth Management, and other segments. The Securities Services segment offers custody, trust and depositary, accounting, exchange-traded funds, middle-office solutions, transfer agency, services for private equity and real estate funds, foreign exchange, securities lending, liquidity/lending services, and data analytics. This segment also provides trustee, paying agency, fiduciary, escrow and other financial, issuer, and support services for brokers and investors. The Market and Wealth Services segment offers clearing and custody, investment, wealth and retirement solutions, technology and enterprise data management, trading, and prime brokerage services. This segment also provides integrated cash management solutions, including payments, foreign exchange, liquidity management, receivables processing and payables management, and trade finance and processing services. The Investment and Wealth Management segment offers investment management strategies and distribution of investment products, investment management, custody, wealth and estate planning, private banking, investment, and information management services. The Other segment engages in the provision of leasing, corporate treasury, derivative and other trading, corporate and bank-owned life insurance, renewable energy investment, and business exit services. It serves central banks and sovereigns, financial institutions, asset managers, insurance companies, corporations, local authorities and high net-worth individuals, and family offices. The Bank of New York Mellon Corporation was founded in 1784 and is headquartered in New York, New York.