Critical Survey: OFG Bancorp (NYSE:OFG) vs. Hilltop (NYSE:HTH)

OFG Bancorp (NYSE:OFG) and Hilltop (NYSE:HTH) are both mid-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, valuation, earnings, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

92.7% of OFG Bancorp shares are owned by institutional investors. Comparatively, 57.1% of Hilltop shares are owned by institutional investors. 1.2% of OFG Bancorp shares are owned by company insiders. Comparatively, 5.4% of Hilltop shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares OFG Bancorp and Hilltop’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFG Bancorp	24.08%	15.92%	1.80%
Hilltop	10.17%	7.40%	1.02%

Dividends

OFG Bancorp pays an annual dividend of $1.40 per share and has a dividend yield of 2.8%. Hilltop pays an annual dividend of $0.88 per share and has a dividend yield of 2.3%. OFG Bancorp pays out 27.6% of its earnings in the form of a dividend. Hilltop pays out 32.6% 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. OFG Bancorp has increased its dividend for 5 consecutive years and Hilltop has increased its dividend for 8 consecutive years. OFG Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for OFG Bancorp and Hilltop, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFG Bancorp	0	5	2	0	2.29
Hilltop	0	3	1	1	2.60

OFG Bancorp currently has a consensus target price of $55.20, indicating a potential upside of 8.96%. Hilltop has a consensus target price of $40.00, indicating a potential upside of 5.49%. Given OFG Bancorp’s higher probable upside, research analysts clearly believe OFG Bancorp is more favorable than Hilltop.

Risk & Volatility

OFG Bancorp has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500. Comparatively, Hilltop has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.

Earnings and Valuation

This table compares OFG Bancorp and Hilltop”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFG Bancorp	$902.28 million	2.37	$205.10 million	$5.08	9.97
Hilltop	$1.63 billion	1.34	$165.59 million	$2.70	14.04

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

Summary

OFG Bancorp beats Hilltop on 11 of the 18 factors compared between the two stocks.

About OFG Bancorp

OFG Bancorp, a financial holding company, provides a range of banking and financial services. It operates through three segments: Banking, Wealth Management, and Treasury. The company offers checking and savings accounts, and individual retirement accounts; certificate of deposits, as well as time deposit products; commercial, consumer, auto leasing, and mortgage lending services; credit cards; cash management; financial planning and insurance services; and corporate and individual trust, and retirement services. In addition, it provides securities brokerage and investment advisory services, including various investment alternatives, such as tax-advantaged fixed income securities, mutual funds, stocks, and bonds to retail and institutional clients; and separately-managed accounts and mutual fund asset allocation programs. Further, the company engages in the insurance agency and reinsurance businesses; administration and servicing of retirement plans; and various treasury-related functions with an investment portfolio consisting of mortgage-backed securities, obligations of U.S. government sponsored agencies, and U.S. Treasury securities and money market instruments. Additionally, it offers money management and investment banking services; and engages in the asset/liability management activities, such as purchases and sales of investment securities, interest rate risk management, derivatives, and borrowings. The company provides investment brokerage, transactional, international trade financing, residential mortgage, and consumer finance services. OFG Bancorp was founded in 1964 and is headquartered in San Juan, Puerto Rico.

About Hilltop

Hilltop Holdings Inc. provides business and consumer banking services. It operates through three segments: Banking, Broker-Dealer, and Mortgage Origination. The Banking segment offers savings, checking, interest-bearing checking, and money market accounts; certificates of deposit; lines and letters of credit, home improvement and equity loans, loans for purchasing and carrying securities, term, agricultural and commercial real estate, equipment loans, and other lending products; and mortgage, commercial and industrial loans, and term and construction finance. It also provides treasury management, asset management, check cards, safe deposit boxes, online banking, bill pay, and overdraft privilege services; and estate planning, management and administration, investment portfolio management, employee benefit accounts, and individual retirement accounts services, as well as automated teller machines. The Broker-Dealer segment offers public finance services that assist public entities in originating, syndicating, and distributing securities of municipalities and political subdivisions; specialized advisory and investment banking services; advice and guidance to arbitrage rebate compliance, portfolio management, and local government investment pool administration; advisory services and products for derivatives and commodities; agricultural insurance; and sells, trades in, and underwrites U.S. government and government agency bonds, corporate bonds, and municipal bonds; mortgage-backed, asset-backed, and commercial mortgage-backed securities and structured products; and provides asset and liability management advisory, clearing, retail, and securities lending services. The Mortgage Origination segment offers fixed and adjustable rate mortgages, jumbo, new construction, Federal Housing Administration, Veterans Affairs, and United States Department of Agriculture loans. Hilltop Holdings Inc. was incorporated in 1998 and is based in Dallas, Texas.