State Street Corporation (STT): Should You Bank on This Stock?

BNY Mellon generates half of its revenue from its asset servicing business and the rest from treasury services, prime brokerage, and ADR issuance. Its dividend yield of 2% may be higher than State Street’s 1.60%; however, State Street Corporation (NYSE:STT) had increased its dividend per share by 33% compared to BNY Mellon’s none. This shows that State Street is providing a higher return to investors.

BNY Mellon has undergone a share repurchase program of $1.35 billion, however it is still less than State Street’s $2.1 billion program. BNY Mellon has a diversified portfolio of assets to service and retain clients, but I still prefer State Street due to the phenomenal growth and stability it has shown in the present scenario.

Northern Trust’s wealth management business is its distinguishing factor which generates about a quarter of its revenue. In the past 10 years, Northern Trust has been able to double its asset under management (AUM) from $100 billion to $201 billion. Along with providing primary services, it also offers a range of complementary services such as tax planning, private banking, and brokerage services.

Apart from this, Northern Trust is looking to bolster its international footprint in the Europe and Asia Pacific region. Looking at the financial performance vis-à-vis its peers, State Street Corporation (NYSE:STT) still has the edge in providing returns to investors. The share repurchase program of Northern Trust boils down to a just 3.30% dividend increase compared to a 8.30% for State Street. In addition to this, the ROE of Northern Trust (9.3%) is less than State Street (10.3%).

Summary

To sum up, State Street Corporation (NYSE:STT) beats its competitors by a huge margin when it comes to providing returns. Not only this, it is trading at a discount to Northern Trust which has a price to book (P/B) of 1.4, whereas State Street has a P/B of 1.8, thanks to its focused business and a superior ROE. It has increased its buybacks and dividend payment in 2013. Investors looking to invest in a stock having a significant upside potential and providing competitive returns at the same time should definitely not miss this opportunity.

Tanya Kanodia has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Should You Bank on This Stock? originally appeared on Fool.com.

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