Critical Comparison: Franklin Resources (NYSE:BEN) & Bank Of New York Mellon (BK)

Bank Of New York Mellon (NYSE: BK) and Franklin Resources (NYSE:BEN) are both large-cap investment management & fund operators – nec companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, dividends, earnings, valuation and risk.

Institutional and Insider Ownership

82.9% of Bank Of New York Mellon shares are held by institutional investors. Comparatively, 44.8% of Franklin Resources shares are held by institutional investors. 3.6% of Bank Of New York Mellon shares are held by insiders. Comparatively, 22.2% of Franklin Resources shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Bank Of New York Mellon and Franklin Resources, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank Of New York Mellon 2 7 6 0 2.27
Franklin Resources 3 5 1 0 1.78

Bank Of New York Mellon currently has a consensus price target of $56.33, indicating a potential downside of 3.57%. Franklin Resources has a consensus price target of $43.56, indicating a potential downside of 2.19%. Given Franklin Resources’ higher possible upside, analysts plainly believe Franklin Resources is more favorable than Bank Of New York Mellon.

Dividends

Bank Of New York Mellon pays an annual dividend of $0.96 per share and has a dividend yield of 1.6%. Franklin Resources pays an annual dividend of $0.92 per share and has a dividend yield of 2.1%. Bank Of New York Mellon pays out 28.2% of its earnings in the form of a dividend. Franklin Resources pays out 30.7% 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. Bank Of New York Mellon has increased its dividend for 36 consecutive years and Franklin Resources has increased its dividend for 5 consecutive years.

Profitability

This table compares Bank Of New York Mellon and Franklin Resources’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank Of New York Mellon 23.14% 10.51% 1.11%
Franklin Resources 26.54% 13.48% 9.92%

Volatility and Risk

Bank Of New York Mellon has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500. Comparatively, Franklin Resources has a beta of 1.75, meaning that its share price is 75% more volatile than the S&P 500.

Valuation and Earnings

This table compares Bank Of New York Mellon and Franklin Resources’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Bank Of New York Mellon $15.67 billion 3.82 $3.55 billion $3.40 17.18
Franklin Resources $6.39 billion 3.85 $1.70 billion $3.00 14.84

Bank Of New York Mellon has higher revenue and earnings than Franklin Resources. Franklin Resources 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.

Summary

Bank Of New York Mellon beats Franklin Resources on 9 of the 17 factors compared between the two stocks.

Bank Of New York Mellon Company Profile

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.

Franklin Resources Company Profile

Franklin Resources, Inc. is a holding company. The Company, along with its subsidiaries, operates as Franklin Templeton Investments. It is a global investment management company that provides investment management and related services to retail, institutional and high net-worth clients in jurisdictions around the world. The Company offers its investment products and services under the Franklin, Templeton, Franklin Mutual Series, Franklin Bissett, Fiduciary Trust, Darby, Balanced Equity Management, K2 and LibertyShares brand names. Its products include investment funds and institutional, high net-worth and separately managed accounts (collectively, sponsored investment products (SIPs)). It offers various types of SIPs, such as the United States funds, cross-border funds, local/regional funds, and other managed accounts, alternative investment products and trusts. Its investment funds include the United States-registered funds, non-United States-registered funds and unregistered funds.

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