Washington Federal (NASDAQ:WAFD – Get Rating) and Bank of America (NYSE:BAC – Get Rating) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, valuation, analyst recommendations and dividends.
Earnings and Valuation
This table compares Washington Federal and Bank of America’s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Washington Federal | $732.73 million | 2.70 | $236.33 million | $4.09 | 7.34 |
| Bank of America | $115.05 billion | 2.04 | $27.53 billion | $3.33 | 8.86 |
Bank of America has higher revenue and earnings than Washington Federal. Washington Federal is trading at a lower price-to-earnings ratio than Bank of America, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
Dividends
Washington Federal pays an annual dividend of $1.00 per share and has a dividend yield of 3.3%. Bank of America pays an annual dividend of $0.88 per share and has a dividend yield of 3.0%. Washington Federal pays out 24.4% of its earnings in the form of a dividend. Bank of America pays out 26.4% 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. Washington Federal has raised its dividend for 13 consecutive years and Bank of America has raised its dividend for 2 consecutive years. Washington Federal is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Analyst Recommendations
This is a breakdown of recent ratings for Washington Federal and Bank of America, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Washington Federal | 0 | 1 | 2 | 0 | 2.67 |
| Bank of America | 2 | 6 | 10 | 0 | 2.44 |
Washington Federal currently has a consensus price target of $34.00, indicating a potential upside of 13.22%. Bank of America has a consensus price target of $36.77, indicating a potential upside of 24.70%. Given Bank of America’s higher possible upside, analysts plainly believe Bank of America is more favorable than Washington Federal.
Risk & Volatility
Washington Federal has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500. Comparatively, Bank of America has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500.
Profitability
This table compares Washington Federal and Bank of America’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Washington Federal | 31.00% | 14.12% | 1.33% |
| Bank of America | 21.85% | 11.72% | 0.92% |
Summary
Washington Federal beats Bank of America on 11 of the 17 factors compared between the two stocks.
About Washington Federal
Washington Federal, Inc. engages in the provision of lending, depository, insurance, and other banking services to consumers. It operates under the Commercial Loans and Consumer Loans segments. The Commercial Loans segment is disaggregated into five classes: multi-family, commercial real estate, commercial and industrial, construction, and land acquisition and development. The Consumer Loans segment includes single-family-residential mortgage, custom construction, consumer lot loans, home equity lines of credit, and other consumer. The company was founded on November 15, 1994 and is headquartered in Seattle, WA.
About Bank of America
Bank of America Corp. is a bank and financial holding company, which engages in the provision of banking and nonbank financial services. It operates through the following segments: Consumer Banking, Global Wealth and Investment Management (GWIM), Global Banking, Global Markets, and All Other. The Consumer Banking segment offers credit, banking, and investment products and services to consumers and small businesses. The GWIM segment offers solutions to meet clients’ needs through a full set of investment management, brokerage, banking, and retirement products. The Global Banking segment deals with lending-related products and services, integrated working capital management and treasury solutions to clients, and underwriting and advisory services. The Global Markets segment includes sales and trading services, as well as research, to institutional clients across fixed-income, credit, currency, commodity, and equity businesses. The All Other segment consists of asset and liability management activities, equity investments, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the mortgage servicing rights (MSR) valuation model for both core and no
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