Arlington Asset Investment Corp (NYSE: AI) and Affiliated Managers Group (NYSE:AMG) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.

Insider and Institutional Ownership

38.6% of Arlington Asset Investment Corp shares are held by institutional investors. Comparatively, 96.2% of Affiliated Managers Group shares are held by institutional investors. 2.7% of Arlington Asset Investment Corp shares are held by company insiders. Comparatively, 1.4% of Affiliated Managers Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Arlington Asset Investment Corp has a beta of 1.13, indicating that its share price is 13% more volatile than the S&P 500. Comparatively, Affiliated Managers Group has a beta of 1.66, indicating that its share price is 66% more volatile than the S&P 500.

Dividends

Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 17.1%. Affiliated Managers Group pays an annual dividend of $0.80 per share and has a dividend yield of 0.5%. Arlington Asset Investment Corp pays out -146.7% of its earnings in the form of a dividend. Affiliated Managers Group pays out 8.9% 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. Arlington Asset Investment Corp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Arlington Asset Investment Corp and Affiliated Managers Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arlington Asset Investment Corp 0 2 2 0 2.50
Affiliated Managers Group 0 2 5 0 2.71

Arlington Asset Investment Corp currently has a consensus target price of $14.94, suggesting a potential upside of 16.34%. Affiliated Managers Group has a consensus target price of $196.86, suggesting a potential upside of 13.59%. Given Arlington Asset Investment Corp’s higher probable upside, analysts plainly believe Arlington Asset Investment Corp is more favorable than Affiliated Managers Group.

Valuation & Earnings

This table compares Arlington Asset Investment Corp and Affiliated Managers Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Arlington Asset Investment Corp $45.40 million 7.34 -$38.93 million ($1.50) -8.56
Affiliated Managers Group $2.21 billion 4.39 $842.60 million $9.02 19.21

Affiliated Managers Group has higher revenue and earnings than Arlington Asset Investment Corp. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Affiliated Managers Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Arlington Asset Investment Corp and Affiliated Managers Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arlington Asset Investment Corp -33.84% -10.44% -0.93%
Affiliated Managers Group 22.99% 17.45% 8.75%

Summary

Affiliated Managers Group beats Arlington Asset Investment Corp on 10 of the 15 factors compared between the two stocks.

Arlington Asset Investment Corp Company Profile

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

Affiliated Managers Group Company Profile

Affiliated Managers Group, Inc. is an asset management company with equity investments in boutique investment management firms. The Company operates in three segments, which represent its principal distribution channels: Institutional, Mutual Fund and High Net Worth. The equity method investments in the Institutional distribution channel are made in relationships with public and private client entities, including foundations, endowments, sovereign wealth funds and retirement plans for corporations and municipalities. The equity method investments in the Mutual Fund distribution channel are made in advisory or sub-advisory relationships with active return-oriented mutual funds, Undertakings for Collective Investment in Transferable Securities and other retail products. The equity method investments in the High Net Worth distribution channel are made in relationships with high net worth and ultra-high net worth individuals, families, trusts, foundations, endowments and retirement plans.

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