Brookfield Asset Management (NYSE: BAM) and Legg Mason (NYSE:LM) are both mid-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their risk, institutional ownership, profitabiliy, earnings, valuation, dividends and analyst recommendations.

Dividends

Brookfield Asset Management pays an annual dividend of $0.56 per share and has a dividend yield of 1.4%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.9%. Brookfield Asset Management pays out 44.8% of its earnings in the form of a dividend. Legg Mason pays out 46.5% 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. Brookfield Asset Management has raised its dividend for 5 consecutive years and Legg Mason has raised its dividend for 7 consecutive years. Legg Mason is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Brookfield Asset Management and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Brookfield Asset Management 5.39% 2.12% 0.85%
Legg Mason 8.21% 6.84% 3.35%

Analyst Recommendations

This is a summary of current recommendations for Brookfield Asset Management and Legg Mason, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Brookfield Asset Management 0 1 7 0 2.88
Legg Mason 2 2 5 0 2.33

Brookfield Asset Management presently has a consensus price target of $41.69, indicating a potential upside of 6.92%. Legg Mason has a consensus price target of $41.38, indicating a potential upside of 8.09%. Given Legg Mason’s higher possible upside, analysts plainly believe Legg Mason is more favorable than Brookfield Asset Management.

Institutional and Insider Ownership

54.0% of Brookfield Asset Management shares are owned by institutional investors. Comparatively, 80.0% of Legg Mason shares are owned by institutional investors. 12.7% of Legg Mason shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Brookfield Asset Management and Legg Mason’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Brookfield Asset Management $26.74 billion 1.40 $8.19 billion $1.25 31.19
Legg Mason $2.98 billion 1.22 $557.49 million $2.41 15.88

Brookfield Asset Management has higher revenue and earnings than Legg Mason. Legg Mason is trading at a lower price-to-earnings ratio than Brookfield Asset Management, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Brookfield Asset Management has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.2, suggesting that its stock price is 120% more volatile than the S&P 500.

Summary

Legg Mason beats Brookfield Asset Management on 10 of the 17 factors compared between the two stocks.

Brookfield Asset Management Company Profile

Brookfield Asset Management Inc. is an alternative asset manager. The Company operates in eight segments. The Asset Management segment manages its listed partnerships, private funds and public markets on behalf of its clients. The Property segment includes the ownership, operation and development of office, retail and other properties. The Renewable power segment operates and develops hydroelectric, wind power and other generating facilities. The Infrastructure segment includes the ownership, operation and development of utilities and agricultural operations, among others. The Residential development segment includes homebuilding, condominium development and land development. The Service activities segment includes construction management and contracting services and property services. The Private equity segment includes the investments and operations overseen by its private equity group. The Corporate activities segment includes the allocation of capital to its operating platforms.

Legg Mason Company Profile

Legg Mason, Inc. is a holding company. The Company and its subsidiaries are principally engaged in providing asset management and related financial services to individuals, institutions, corporations and municipalities. The Company operates through Global Asset Management segment. Global Asset Management provides investment advisory services to institutional and individual clients and to the Company-sponsored investment funds. The Company, through its subsidiaries, provides investment management and related services to institutional and individual clients, Company-sponsored investment funds and retail separately managed account programs. It offers its products and services directly and through various financial intermediaries. It has operations principally in the United States and the United Kingdom and also has offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan.

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