Federated Investors (FII) and Eaton Vance (EV) Critical Contrast

Eaton Vance (NYSE: EV) and Federated Investors (NYSE:FII) are both mid-cap financials companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, risk, profitability and valuation.

Profitability

This table compares Eaton Vance and Federated Investors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eaton Vance 18.45% 33.45% 13.84%
Federated Investors 19.32% 34.54% 18.68%

Institutional and Insider Ownership

68.7% of Eaton Vance shares are owned by institutional investors. Comparatively, 85.2% of Federated Investors shares are owned by institutional investors. 7.1% of Federated Investors shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Eaton Vance has a beta of 1.9, suggesting that its share price is 90% more volatile than the S&P 500. Comparatively, Federated Investors has a beta of 1.56, suggesting that its share price is 56% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Eaton Vance and Federated Investors, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eaton Vance 0 5 2 0 2.29
Federated Investors 3 5 0 0 1.63

Eaton Vance currently has a consensus target price of $51.36, indicating a potential downside of 14.39%. Federated Investors has a consensus target price of $29.29, indicating a potential downside of 16.33%. Given Eaton Vance’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Eaton Vance is more favorable than Federated Investors.

Dividends

Eaton Vance pays an annual dividend of $1.24 per share and has a dividend yield of 2.1%. Federated Investors pays an annual dividend of $1.00 per share and has a dividend yield of 2.9%. Eaton Vance pays out 51.2% of its earnings in the form of a dividend. Federated Investors pays out 47.2% 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 Investors has increased its dividend for 37 consecutive years. Federated Investors is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Eaton Vance and Federated Investors’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Eaton Vance $1.53 billion 4.63 $282.13 million $2.42 24.79
Federated Investors $1.14 billion 3.09 $208.91 million $2.12 16.51

Eaton Vance has higher revenue and earnings than Federated Investors. Federated Investors is trading at a lower price-to-earnings ratio than Eaton Vance, indicating that it is currently the more affordable of the two stocks.

Summary

Eaton Vance beats Federated Investors on 9 of the 17 factors compared between the two stocks.

Eaton Vance Company Profile

Eaton Vance Corp. is engaged in the business of managing investment funds and providing investment management and advisory services to high-net-worth individuals and institutions. The Company operates as an investment advisor to funds and separate accounts. The Company, through its subsidiaries and other affiliates, manages active equity, income and alternative strategies across a range of investment styles and asset classes, including the United States and global equities, floating-rate bank loans, municipal bonds, global income, high-yield and investment grade bonds. Through its subsidiary, the Company also manages a range of engineered alpha strategies, including systematic equity, systematic alternatives and managed options strategies. The Company’s open-end fund lineup includes tax-managed equity funds, and non-tax-managed equity and multi-asset funds. The Company’s family of closed-end funds includes municipal bond, domestic and global equity, and bank loan.

Federated Investors Company Profile

Federated Investors, Inc. (Federated) is a provider of investment management products and related financial services. Federated operates through investment management business segment. It is engaged in sponsoring, marketing and providing investment-related services to various investment products, including mutual funds and Separate Accounts, which include separately managed accounts, institutional accounts, sub-advised funds and other managed products. It operates in one segment, the investment management business. As of December 31, 2016, Federated provided investment advisory services to 124 sponsored investment companies and other funds (Federated Funds). It markets these funds to banks, brokers and dealers and other financial intermediaries using them to meet the needs of their customers and clients, including retail investors, corporations and retirement plans. The Company offers a range of products and strategies, including money market, equity and fixed-income investments.

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