Comparing LPL Financial (NASDAQ:LPLA) & Ameriprise Financial (NYSE:AMP)

Ameriprise Financial (NYSE:AMP) and LPL Financial (NASDAQ:LPLA) are both large-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, dividends, risk, institutional ownership, valuation, profitability and analyst recommendations.

Dividends

Ameriprise Financial pays an annual dividend of $6.80 per share and has a dividend yield of 1.3%. LPL Financial pays an annual dividend of $1.20 per share and has a dividend yield of 0.4%. Ameriprise Financial pays out 15.3% of its earnings in the form of a dividend. LPL Financial pays out 6.9% 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. Ameriprise Financial has raised its dividend for 21 consecutive years. Ameriprise Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Ameriprise Financial has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, LPL Financial has a beta of 0.55, suggesting that its share price is 45% less volatile than the S&P 500.

Earnings & Valuation

This table compares Ameriprise Financial and LPL Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ameriprise Financial	$19.83 billion	2.27	$3.56 billion	$44.45	11.67
LPL Financial	$20.40 billion	1.17	$863.02 million	$17.43	17.55

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

Profitability

This table compares Ameriprise Financial and LPL Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ameriprise Financial	20.99%	69.94%	2.22%
LPL Financial	6.83%	32.05%	9.41%

Analyst Recommendations

This is a summary of recent ratings and price targets for Ameriprise Financial and LPL Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ameriprise Financial	2	5	4	1	2.33
LPL Financial	0	3	14	0	2.82

Ameriprise Financial presently has a consensus price target of $557.00, suggesting a potential upside of 7.36%. LPL Financial has a consensus price target of $400.60, suggesting a potential upside of 30.93%. Given LPL Financial’s stronger consensus rating and higher probable upside, analysts plainly believe LPL Financial is more favorable than Ameriprise Financial.

Institutional and Insider Ownership

83.9% of Ameriprise Financial shares are owned by institutional investors. Comparatively, 95.7% of LPL Financial shares are owned by institutional investors. 0.6% of Ameriprise Financial shares are owned by company insiders. Comparatively, 0.6% of LPL Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Ameriprise Financial beats LPL Financial on 9 of the 17 factors compared between the two stocks.

About Ameriprise Financial

Ameriprise Financial, Inc., together with its subsidiaries, provides various financial products and services to individual and institutional clients in the United States and internationally. It operates through four segments: Advice & Wealth Management, Asset Management, Retirement & Protection Solutions, and Corporate & Other. The Advice & Wealth Management segment provides financial planning and advice; brokerage products and services for retail and institutional clients; discretionary and non-discretionary investment advisory accounts; mutual funds; insurance and annuities products; cash management and banking products; and face-amount certificates. The Asset Management segment offers investment management, advice, and products to retail, high net worth, and institutional clients through third-party financial institutions, advisor networks, direct retail, and its institutional sales force under the Columbia Threadneedle Investments brand name. This segment products include U.S. mutual funds and their non-U.S. equivalents, exchange-traded funds, variable product funds underlying insurance, and annuity separate accounts; and institutional asset management products, such as traditional asset classes, separately managed accounts, individually managed accounts, collateralized loan obligations, hedge funds, collective funds, and property and infrastructure funds. The Retirement & Protection Solutions segment provides variable annuity products, as well as life and disability income insurance products to retail clients. The company was formerly known as American Express Financial Corporation and changed its name to Ameriprise Financial, Inc. in September 2005. Ameriprise Financial, Inc. was founded in 1894 and is headquartered in Minneapolis, Minnesota.

About LPL Financial

LPL Financial Holdings Inc., together with its subsidiaries, provides an integrated platform of brokerage and investment advisory services to independent financial advisors and financial advisors at enterprises in the United States. Its brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans, and insurance. The company also provides fee-based platforms that provide access to mutual funds, exchange-traded funds, stocks, bonds, certain option strategies, unit investment trusts, and institutional money managers and no-load multi-manager variable annuities. In addition, it offers money market products; and retirement solutions for commission-and fee-based services that allow advisors to provide brokerage services, consultation, and advice to retirement plan sponsors. Further, the company provides other services comprising tools and services that enable advisors to maintain and grow their practices; trust, investment management oversight, and custodial services for estates and families, as well as insurance brokerage general agency services; and technology products, such as proposal generation, investment analytics, and portfolio modeling. The company was formerly known as LPL Investment Holdings Inc. and changed its name to LPL Financial Holdings Inc. in June 2012. LPL Financial Holdings Inc. was founded in 1989 and is based in San Diego, California.