Critical Contrast: Charles Schwab (NYSE:SCHW) versus Invesco (NYSE:IVZ)

Charles Schwab (NYSE:SCHW) and Invesco (NYSE:IVZ) are both large-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.

Dividends

Charles Schwab pays an annual dividend of $1.28 per share and has a dividend yield of 1.4%. Invesco pays an annual dividend of $0.86 per share and has a dividend yield of 3.1%. Charles Schwab pays out 23.3% of its earnings in the form of a dividend. Invesco pays out -126.5% 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. Charles Schwab has increased its dividend for 1 consecutive years and Invesco has increased its dividend for 5 consecutive years. Invesco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of current recommendations for Charles Schwab and Invesco, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Charles Schwab	1	5	16	1	2.74
Invesco	0	8	5	1	2.50

Charles Schwab presently has a consensus price target of $118.95, suggesting a potential upside of 29.56%. Invesco has a consensus price target of $33.12, suggesting a potential upside of 17.46%. Given Charles Schwab’s stronger consensus rating and higher probable upside, analysts plainly believe Charles Schwab is more favorable than Invesco.

Risk & Volatility

Charles Schwab has a beta of 0.79, indicating that its stock price is 21% less volatile than the S&P 500. Comparatively, Invesco has a beta of 1.65, indicating that its stock price is 65% more volatile than the S&P 500.

Profitability

This table compares Charles Schwab and Invesco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Charles Schwab	38.79%	24.53%	2.14%
Invesco	-0.93%	12.83%	5.03%

Valuation and Earnings

This table compares Charles Schwab and Invesco”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Charles Schwab	$23.92 billion	6.64	$8.85 billion	$5.50	16.69
Invesco	$6.38 billion	1.96	-$281.70 million	($0.68)	-41.46

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

Insider & Institutional Ownership

84.4% of Charles Schwab shares are held by institutional investors. Comparatively, 66.1% of Invesco shares are held by institutional investors. 6.3% of Charles Schwab shares are held by company insiders. Comparatively, 1.4% of Invesco shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Charles Schwab beats Invesco on 12 of the 17 factors compared between the two stocks.

About Charles Schwab

The Charles Schwab Corporation, together with its subsidiaries, operates as a savings and loan holding company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services in the United States and internationally. The company operates in two segments, Investor Services and Advisor Services. It offers brokerage accounts with equity and fixed income trading, margin lending, options trading, futures and forex trading, and cash management capabilities, including certificates of deposit; third-party mutual funds through the Mutual Fund Marketplace and Mutual Fund OneSource service, as well as mutual fund trading and clearing services to broker-dealers; exchange-traded funds; advisory solutions for managed portfolios, separately managed accounts, customized personal advice for tailored portfolios, specialized planning, and full-time portfolio management; banking products comprising checking and savings accounts, first lien residential real estate mortgage loans, home equity lines of credit, and pledged asset lines; and trust custody services, personal trust reporting services, and administrative trustee services. It also provides digital retirement calculators; integrated web-, mobile-, and software-based trading platforms, real-time market data, options trading, premium research, and multi-channel access; self-service education and support tools; online research and analysis tools; equity compensation plan sponsors full-service recordkeeping for stock plans, stock options, restricted stock, performance shares, and stock appreciation rights; retirement plan services; mutual fund clearing services; and advisor services, including interactive tools and educational content. The Company operates through branch offices. The Charles Schwab Corporation was incorporated in 1971 and is headquartered in Westlake, Texas.

About Invesco

Invesco Ltd. is a publicly owned investment manager. The firm provides its services to retail clients, institutional clients, high-net worth clients, public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, financial institutions, and sovereign wealth funds. It manages separate client-focused equity and fixed income portfolios. The firm also launches equity, fixed income, commodity, multi-asset, and balanced mutual funds for its clients. It launches equity, fixed income, multi-asset, and balanced exchange-traded funds. The firm also launches and manages private funds. It invests in the public equity and fixed income markets across the globe. The firm also invests in alternative markets, such as commodities and currencies. For the equity portion of its portfolio, it invests in growth and value stocks of large-cap, mid-cap, and small-cap companies. For the fixed income portion of its portfolio, the firm invests in convertibles, government bonds, municipal bonds, treasury securities, and cash. It also invests in short term and intermediate term bonds, investment grade and high yield bonds, taxable and tax-free bonds, senior secured loans, and structured securities such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities. The firm employs absolute return, global macro, and long/short strategies. It employs quantitative analysis to make its investments. The firm was formerly known as Invesco Plc, AMVESCAP plc, Amvesco plc, Invesco PLC, Invesco MIM, and H. Lotery & Co. Ltd. Invesco Ltd. was founded in 1935 and is based in Atlanta, Georgia with an additional office in Hamilton, Bermuda.