Head to Head Review: Webster Financial (NYSE:WBS) versus Arrow Financial (NASDAQ:AROW)

Arrow Financial (NASDAQ:AROW) and Webster Financial (NYSE:WBS) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Dividends

Arrow Financial pays an annual dividend of $1.16 per share and has a dividend yield of 3.6%. Webster Financial pays an annual dividend of $1.60 per share and has a dividend yield of 2.5%. Arrow Financial pays out 56.0% of its earnings in the form of a dividend. Webster Financial pays out 29.8% 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. Arrow Financial has raised its dividend for 7 consecutive years. Arrow Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

46.7% of Arrow Financial shares are held by institutional investors. Comparatively, 85.6% of Webster Financial shares are held by institutional investors. 3.3% of Arrow Financial shares are held by company insiders. Comparatively, 0.5% of Webster Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Arrow Financial and Webster Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arrow Financial	14.65%	9.46%	0.87%
Webster Financial	21.32%	11.07%	1.23%

Analyst Ratings

This is a summary of current ratings and recommmendations for Arrow Financial and Webster Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arrow Financial	0	3	0	0	2.00
Webster Financial	1	1	14	0	2.81

Arrow Financial presently has a consensus price target of $30.75, indicating a potential downside of 5.88%. Webster Financial has a consensus price target of $72.77, indicating a potential upside of 12.58%. Given Webster Financial’s stronger consensus rating and higher possible upside, analysts plainly believe Webster Financial is more favorable than Arrow Financial.

Volatility and Risk

Arrow Financial has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, Webster Financial has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500.

Earnings and Valuation

This table compares Arrow Financial and Webster Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arrow Financial	$223.07 million	2.41	$29.71 million	$2.07	15.78
Webster Financial	$4.18 billion	2.49	$768.71 million	$5.37	12.04

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

Summary

Webster Financial beats Arrow Financial on 13 of the 17 factors compared between the two stocks.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.

About Webster Financial

Webster Financial Corporation operates as the bank holding company for Webster Bank, National Association that provides a range of financial products and services to individuals, families, and businesses in the United States. It operates through three segments: Commercial Banking, HSA Bank, and Consumer Banking. The Commercial Banking segment offers commercial real estate and equipment financing, business banking, asset-based lending, and commercial services; public sector finance; mortgage warehouse financing; sponsor and specialty financing services; credit, deposit, and cash flow management services; and wealth management solutions to business owners and operators, including trust, asset management, financial planning, insurance, retirement, and investment products, as well as treasury management services comprising derivative, treasury, accounts payable, accounts receivable, and trade products and services. This segment also provides commercial services, such as accounts receivable factoring and trade financing, payroll funding, and business process outsourcing. The HSA Bank segment offers health savings accounts, health reimbursement arrangements, flexible spending accounts, and commuter benefit services that are distributed directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. The Consumer Banking segment provides consumer deposit and fee-based services, residential mortgages, home equity lines, secured and unsecured loans, and credit cards to consumers; and small business banking products, such as credit, deposit, and cash flow management products to businesses and professional service firms. The company offers online and mobile banking services. Webster Financial Corporation was founded in 1935 and is headquartered in Stamford, Connecticut.