Critical Contrast: KeyCorp (NYSE:KEY) versus Bank of New York Mellon (NYSE:BK)

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

Institutional & Insider Ownership

79.7% of KeyCorp shares are owned by institutional investors. Comparatively, 85.3% of Bank of New York Mellon shares are owned by institutional investors. 0.5% of KeyCorp shares are owned by company insiders. Comparatively, 0.1% of Bank of New York Mellon shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Risk and Volatility

KeyCorp has a beta of 1.11, indicating that its stock price is 11% more volatile than the S&P 500. Comparatively, Bank of New York Mellon has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for KeyCorp and Bank of New York Mellon, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
KeyCorp	0	10	11	0	2.52
Bank of New York Mellon	0	6	8	0	2.57

KeyCorp presently has a consensus target price of $19.18, indicating a potential upside of 4.35%. Bank of New York Mellon has a consensus target price of $94.38, indicating a potential downside of 3.64%. Given KeyCorp’s higher possible upside, equities analysts plainly believe KeyCorp is more favorable than Bank of New York Mellon.

Dividends

KeyCorp pays an annual dividend of $0.82 per share and has a dividend yield of 4.5%. Bank of New York Mellon pays an annual dividend of $1.88 per share and has a dividend yield of 1.9%. KeyCorp pays out -482.4% of its earnings in the form of a dividend. Bank of New York Mellon pays out 30.6% 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. KeyCorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
KeyCorp	-0.12%	9.43%	0.74%
Bank of New York Mellon	12.27%	13.46%	1.16%

Earnings & Valuation

This table compares KeyCorp 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
KeyCorp	$9.24 billion	2.18	-$161.00 million	($0.17)	-108.15
Bank of New York Mellon	$39.91 billion	1.76	$4.53 billion	$6.14	15.95

Bank of New York Mellon has higher revenue and earnings than KeyCorp. KeyCorp 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 KeyCorp on 10 of the 17 factors compared between the two stocks.

About KeyCorp

KeyCorp operates as the holding company for KeyBank National Association that provides various retail and commercial banking products and services in the United States. It operates in two segments, Consumer Bank and Commercial Bank. The company offers various deposits, investment products and services; commercial leasing, investment management, consumer finance; and personal finance and financial wellness, student loan refinancing, mortgage and home equity, lending, credit card, treasury, business advisory, wealth management, asset management, cash management, portfolio management, and trust and related services to individuals and small and medium-sized businesses. It also provides a suite of banking and capital market products, such as syndicated finance, debt and equity capital market products, commercial payments, equipment finance, commercial mortgage banking, derivatives, foreign exchange, financial advisory, and public finance, as well as commercial mortgage loans to consumer, energy, healthcare, industrial, public sector, real estate, and technology sectors for middle market clients. In addition, the company offers community development financing, securities underwriting, brokerage, and investment banking services. The company was founded in 1849 and is headquartered in Cleveland, Ohio.

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.