Financial Contrast: LPL Financial (NASDAQ:LPLA) and Bank of New York Mellon (NYSE:BNY)

LPL Financial (NASDAQ:LPLA) and Bank of New York Mellon (NYSE:BNY) are both large-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, profitability, institutional ownership, dividends and valuation.

Dividends

LPL Financial pays an annual dividend of $1.20 per share and has a dividend yield of 0.4%. Bank of New York Mellon pays an annual dividend of $2.52 per share and has a dividend yield of 1.7%. LPL Financial pays out 9.6% of its earnings in the form of a dividend. Bank of New York Mellon pays out 27.8% 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 raised its dividend for 14 consecutive years. Bank of New York Mellon is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

LPL Financial has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500. Comparatively, Bank of New York Mellon has a beta of 1.06, meaning that its stock price is 6% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
LPL Financial	5.13%	32.20%	9.35%
Bank of New York Mellon	16.32%	16.57%	1.29%

Valuation & Earnings

This table compares LPL Financial and Bank of New York Mellon”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LPL Financial	$16.99 billion	1.47	$863.02 million	$12.54	25.30
Bank of New York Mellon	-$21.82 million	-4,574.34	$5.55 billion	$9.05	16.25

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

Analyst Ratings

This is a summary of current ratings and recommmendations for LPL Financial and Bank of New York Mellon, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LPL Financial	0	3	14	0	2.82
Bank of New York Mellon	0	6	7	1	2.64

LPL Financial presently has a consensus price target of $409.69, indicating a potential upside of 29.15%. Bank of New York Mellon has a consensus price target of $164.62, indicating a potential upside of 11.91%. Given LPL Financial’s stronger consensus rating and higher possible upside, equities analysts plainly believe LPL Financial is more favorable than Bank of New York Mellon.

Insider & Institutional Ownership

95.7% of LPL Financial shares are held by institutional investors. Comparatively, 85.3% of Bank of New York Mellon shares are held by institutional investors. 0.6% of LPL Financial 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 large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

LPL Financial beats Bank of New York Mellon on 12 of the 18 factors compared between the two stocks.

About LPL Financial

LPL Financial Holdings Inc., together with its subsidiaries, provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at enterprises in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans, and insurance. The company also provides fee-based platforms that provide access to mutual funds, exchange-traded funds, stocks, bonds, certain option strategies, unit investment trusts, and institutional money managers and no-load multi-manager variable annuities. In addition, it offers money market products; and retirement solutions for commission-and fee-based services that allow advisors to provide brokerage services, consultation, and advice to retirement plan sponsors. Further, the company provides other services comprising tools and services that enable advisors to maintain and grow their practices; trust, investment management oversight, and custodial services for estates and families, as well as insurance brokerage general agency services; and technology products, such as proposal generation, investment analytics, and portfolio modeling. The company was formerly known as LPL Investment Holdings Inc. and changed its name to LPL Financial Holdings Inc. in June 2012. LPL Financial Holdings Inc. was founded in 1989 and is based in San Diego, California.

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.