Critical Survey: BankUnited (NYSE:BKU) & Northern Trust (NASDAQ:NTRS)

BankUnited (NYSE:BKU) and Northern Trust (NASDAQ:NTRS) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, profitability and dividends.

Dividends

BankUnited pays an annual dividend of $1.24 per share and has a dividend yield of 3.2%. Northern Trust pays an annual dividend of $3.00 per share and has a dividend yield of 2.3%. BankUnited pays out 36.4% of its earnings in the form of a dividend. Northern Trust pays out 35.3% 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. BankUnited has increased its dividend for 4 consecutive years. BankUnited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares BankUnited and Northern Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BankUnited	$2.02 billion	1.44	$232.47 million	$3.41	11.40
Northern Trust	$16.06 billion	1.55	$2.03 billion	$8.51	15.28

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
BankUnited	13.19%	9.00%	0.73%
Northern Trust	11.75%	14.06%	1.04%

Risk and Volatility

BankUnited has a beta of 1.32, meaning that its stock price is 32% more volatile than the S&P 500. Comparatively, Northern Trust has a beta of 1.28, meaning that its stock price is 28% more volatile than the S&P 500.

Institutional and Insider Ownership

99.7% of BankUnited shares are owned by institutional investors. Comparatively, 83.2% of Northern Trust shares are owned by institutional investors. 1.2% of BankUnited shares are owned by insiders. Comparatively, 0.8% of Northern Trust shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for BankUnited and Northern Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BankUnited	1	7	3	0	2.18
Northern Trust	3	8	2	0	1.92

BankUnited presently has a consensus price target of $41.5455, indicating a potential upside of 6.84%. Northern Trust has a consensus price target of $117.0833, indicating a potential downside of 9.98%. Given BankUnited’s stronger consensus rating and higher probable upside, equities analysts clearly believe BankUnited is more favorable than Northern Trust.

Summary

BankUnited beats Northern Trust on 9 of the 17 factors compared between the two stocks.

About BankUnited

BankUnited, Inc. operates as the bank holding company for BankUnited, a national banking association that provides a range of banking services in the United States. The company offers deposit products, such as checking, money market deposit, and savings accounts; certificates of deposit; and treasury, commercial payment, and cash management services. Its loans portfolio includes commercial loans, including equipment loans, secured and unsecured lines of credit, formula-based lines of credit, owner-occupied commercial real estate term loans and lines of credit, mortgage warehouse lines, subscription finance facilities, letters of credit, commercial credit cards, small business administration and U.S. department of agriculture product offerings, export-import bank financing products, trade finance, and business acquisition finance credit facilities; commercial real estate loans; residential mortgages; and other consumer loans. The company offers online, mobile, and telephone banking services. It operates through a network of banking centers located in Florida counties and the New York metropolitan area, as well as Dallas, Texas. The company was formerly known as BU Financial Corporation. BankUnited, Inc. was incorporated in 2009 and is headquartered in Miami Lakes, Florida.

About Northern Trust

Northern Trust Corporation, a financial holding company, provides wealth management, asset servicing, asset management, and banking solutions for corporations, institutions, families, and individuals worldwide. It operates in two segments, Asset Servicing and Wealth Management. The Asset Servicing segment offers asset servicing and related services, including custody, fund administration, investment operations outsourcing, investment management, investment risk and analytical services, employee benefit services, securities lending, foreign exchange, treasury management, brokerage services, transition management services, banking, and cash management services. This segment serves corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors. The Wealth Management segment offers trust, investment management, custody, and philanthropic; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking services. This segment serves high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately held businesses. The company also provides asset management services, such as active and passive equity; active and passive fixed income; cash management; muti-asset and alternative asset classes comprising private equity and hedge funds of funds; and multi-manager advisory services and products through separately managed accounts, bank common and collective funds, registered investment companies, exchange traded funds, non-U.S. collective investment funds, and unregistered private investment funds. In addition, it offers overlay and other risk management services. Northern Trust Corporation was founded in 1889 and is headquartered in Chicago, Illinois.