Contrasting T. Rowe Price Group (NASDAQ:TROW) and Federated Hermes (NYSE:FHI)

Federated Hermes (NYSE:FHI) and T. Rowe Price Group (NASDAQ:TROW) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, analyst recommendations, institutional ownership, earnings, dividends and risk.

Institutional and Insider Ownership

75.9% of Federated Hermes shares are owned by institutional investors. Comparatively, 73.4% of T. Rowe Price Group shares are owned by institutional investors. 3.8% of Federated Hermes shares are owned by insiders. Comparatively, 2.0% of T. Rowe Price Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Federated Hermes and T. Rowe Price Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federated Hermes	$1.63 billion	2.41	$268.31 million	$4.79	10.59
T. Rowe Price Group	$7.09 billion	3.25	$2.10 billion	$9.18	11.52

T. Rowe Price Group has higher revenue and earnings than Federated Hermes. Federated Hermes is trading at a lower price-to-earnings ratio than T. Rowe Price Group, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current recommendations for Federated Hermes and T. Rowe Price Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federated Hermes	0	5	3	1	2.56
T. Rowe Price Group	4	11	0	1	1.88

Federated Hermes presently has a consensus price target of $49.67, suggesting a potential downside of 2.08%. T. Rowe Price Group has a consensus price target of $109.00, suggesting a potential upside of 3.03%. Given T. Rowe Price Group’s higher probable upside, analysts plainly believe T. Rowe Price Group is more favorable than Federated Hermes.

Volatility & Risk

Federated Hermes has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, T. Rowe Price Group has a beta of 1.53, indicating that its stock price is 53% more volatile than the S&P 500.

Profitability

This table compares Federated Hermes and T. Rowe Price Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federated Hermes	21.86%	33.03%	17.55%
T. Rowe Price Group	28.89%	19.95%	15.09%

Dividends

Federated Hermes pays an annual dividend of $1.36 per share and has a dividend yield of 2.7%. T. Rowe Price Group pays an annual dividend of $5.08 per share and has a dividend yield of 4.8%. Federated Hermes pays out 28.4% of its earnings in the form of a dividend. T. Rowe Price Group pays out 55.3% 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. Federated Hermes has raised its dividend for 4 consecutive years and T. Rowe Price Group has raised its dividend for 39 consecutive years. T. Rowe Price Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

T. Rowe Price Group beats Federated Hermes on 10 of the 17 factors compared between the two stocks.

About Federated Hermes

Federated Hermes, Inc. is a publicly owned investment manager. Through its subsidiaries, the firm provides its services to individuals, including high net worth individuals, banking or thrift institutions, investment companies, pension and profit sharing plans, pooled investment vehicles, charitable organizations, state or municipal government entities, and registered investment advisors. Through its subsidiaries, it manages separate client-focused equity, fixed income, balanced and money market mutual funds along with separate client-focused equity, fixed income, money market, and balanced portfolios. Through its subsidiaries, the firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of small-cap, mid-cap, and large-cap companies. The firm makes its fixed income investments in ultra-short, short-term, and intermediate-term mortgage-backed, U.S. Government, U.S. corporate, high yield, and municipal securities. It employs both fundamental and quantitative analysis to make its equity investments. Federated Hermes, Inc. was founded in 1955 and is based in Pittsburgh, Pennsylvania with additional offices in New York City and London, United Kingdom.

About T. Rowe Price Group

T. Rowe Price Group, Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutional investors, retirement plans, financial intermediaries, and institutions. It launches and manages equity and fixed income mutual funds. The firm invests in the public equity and fixed income markets across the globe. It employs fundamental and quantitative analysis with a bottom-up approach. The firm utilizes in-house and external research to make its investments. It employs socially responsible investing with a focus on environmental, social, and governance issues. It makes investment in late-stage venture capital transactions and usually invests between $3 million and $5 million. The firm was previously known as T. Rowe Group, Inc. and T. Rowe Price Associates, Inc. T. Rowe Price Group, Inc. was founded in 1937 and is based in Baltimore, Maryland, with additional offices in Colorado Springs, Colorado; Owings Mills, Maryland; San Francisco, California; New York, New York; Philadelphia, Pennsylvania; Tampa, Florida; Toronto, Ontario; Hellerup, Denmark; Amsterdam, The Netherlands; Luxembourg, Grand Duchy of Luxembourg; Zurich, Switzerland; Dubai, United Arab Emirates; London, United Kingdom; Sydney, New South Wales; Hong Kong; Tokyo, Japan; Singapore; Frankfurt, Shanghai, China; Germany, Madrid, Spain, Milan, Italy, Stockholm, Sweden, Melbourne, Australia, Amsterdam, Netherlands and Washington, DC.