Northern Trust (NASDAQ: NTRS) and State Street (NYSE:STT) are both large-cap investment management & fund operators – nec companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, risk, profitability and earnings.

Profitability

This table compares Northern Trust and State Street’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northern Trust 20.27% 12.33% 0.89%
State Street 20.56% 13.03% 1.01%

Volatility and Risk

Northern Trust has a beta of 0.96, indicating that its stock price is 4% less volatile than the S&P 500. Comparatively, State Street has a beta of 1.35, indicating that its stock price is 35% more volatile than the S&P 500.

Valuation and Earnings

This table compares Northern Trust and State Street’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Northern Trust $5.14 billion 4.38 $1.03 billion $4.53 21.85
State Street $10.64 billion 3.41 $2.14 billion $5.77 16.97

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

Institutional & Insider Ownership

81.7% of Northern Trust shares are held by institutional investors. Comparatively, 88.1% of State Street shares are held by institutional investors. 1.3% of Northern Trust shares are held by insiders. Comparatively, 0.7% of State Street shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Northern Trust pays an annual dividend of $1.68 per share and has a dividend yield of 1.7%. State Street pays an annual dividend of $1.68 per share and has a dividend yield of 1.7%. Northern Trust pays out 37.1% of its earnings in the form of a dividend. State Street pays out 29.1% 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. Northern Trust has increased its dividend for 6 consecutive years. State Street is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of current ratings for Northern Trust and State Street, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northern Trust 1 8 3 1 2.31
State Street 1 8 4 1 2.36

Northern Trust currently has a consensus price target of $97.31, indicating a potential downside of 1.69%. State Street has a consensus price target of $98.00, indicating a potential upside of 0.07%. Given State Street’s stronger consensus rating and higher possible upside, analysts plainly believe State Street is more favorable than Northern Trust.

Summary

State Street beats Northern Trust on 13 of the 17 factors compared between the two stocks.

Northern Trust Company Profile

Northern Trust Corporation is a financial holding company. The Company provides asset servicing, fund administration, asset management, fiduciary and banking solutions for corporations, institutions, families and individuals across the world. Its segments include Corporate & Institutional Services (C&IS), Wealth Management, and Treasury and Other. The C&IS segment is a provider of asset servicing and related services to corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds and other institutional investors around the globe. The Wealth Management segment provides trust, investment management, custody and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services, and private and business banking. It conducts its business through various subsidiaries.

State Street 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.

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