Security Federal (OTCMKTS:SFDL) and Northern Trust (NASDAQ:NTRS) Critical Analysis

Security Federal (OTCMKTS:SFDL) and Northern Trust (NASDAQ:NTRS) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, valuation, analyst recommendations, dividends and profitability.

Analyst Recommendations

This is a summary of current ratings for Security Federal and Northern Trust, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Security Federal	0	0	0	0	N/A
Northern Trust	2	6	3	0	2.09

Northern Trust has a consensus target price of $85.75, suggesting a potential upside of 2.29%. Given Northern Trust’s higher probable upside, analysts clearly believe Northern Trust is more favorable than Security Federal.

Institutional & Insider Ownership

83.2% of Northern Trust shares are owned by institutional investors. 35.9% of Security Federal shares are owned by company insiders. Comparatively, 0.6% of Northern Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Security Federal pays an annual dividend of $0.56 per share and has a dividend yield of 2.4%. Northern Trust pays an annual dividend of $3.00 per share and has a dividend yield of 3.6%. Security Federal pays out 19.6% of its earnings in the form of a dividend. Northern Trust pays out 66.2% 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.

Profitability

This table compares Security Federal and Northern Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Security Federal	11.73%	10.99%	0.62%
Northern Trust	7.59%	12.57%	0.91%

Earnings & Valuation

This table compares Security Federal and Northern Trust’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Security Federal	$74.37 million	1.00	$10.19 million	$2.86	8.04
Northern Trust	$12.12 billion	1.42	$1.11 billion	$4.53	18.51

Northern Trust has higher revenue and earnings than Security Federal. Security Federal is trading at a lower price-to-earnings ratio than Northern Trust, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Security Federal has a beta of 0.45, meaning that its share price is 55% less volatile than the S&P 500. Comparatively, Northern Trust has a beta of 1.1, meaning that its share price is 10% more volatile than the S&P 500.

Summary

Northern Trust beats Security Federal on 12 of the 15 factors compared between the two stocks.

About Security Federal

Security Federal Corporation operates as the bank holding company for Security Federal Bank that provides various banking products and services. It offers various deposit products, such as savings and checking accounts, money market accounts, fixed interest rate certificates with varying maturities, and individual retirement accounts. The company provides real estate loans comprising commercial real estate loans secured by non-residential commercial properties, churches, hotels, residential developments, and multi-family dwellings; one-to-four family residential real estate loans; and construction loans and loans for the acquisition, development, and construction of residential subdivisions and commercial projects. In addition, it offers commercial and agricultural business loans secured by business equipment, furniture and fixtures, inventory, and receivables, or unsecured; and consumer loans including home improvements, residential lots, mortgage, automobiles, boats, mobile homes, recreational vehicles, and education. The company offers trust, financial planning, and financial management services; and insurance agency services, such as auto, business, and home insurance. Additionally, it invests in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances, and federal funds, as well as commercial paper and corporate debt securities. It through branch offices in Aiken, Lexington, Richland and Saluda counties in South Carolina and Columbia; and Richmond counties in Georgia. Security Federal Corporation was founded in 1922 and is headquartered in Aiken, South Carolina.

About Northern Trust

Northern Trust Corporation, a financial holding company, provides wealth management, asset servicing, asset management, and banking solutions for corporations, institutions, families, and individuals worldwide. It operates in two segments, Asset Servicing and Wealth Management. The Asset Servicing segment offers asset servicing and related services, including custody, fund administration, investment operations outsourcing, investment management, investment risk and analytical services, employee benefit services, securities lending, foreign exchange, treasury management, brokerage services, transition management services, banking, and cash management services. This segment serves corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors. The Wealth Management segment offers trust, investment management, custody, and philanthropic; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking services. This segment serves high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately held businesses. The company also provides asset management services, such as active and passive equity; active and passive fixed income; cash management; muti-asset and alternative asset classes comprising private equity and hedge funds of funds; and multi-manager advisory services and products through separately managed accounts, bank common and collective funds, registered investment companies, exchange traded funds, non-U.S. collective investment funds, and unregistered private investment funds. In addition, it offers overlay and other risk management services. Northern Trust Corporation was founded in 1889 and is headquartered in Chicago, Illinois.