Heritage Financial (NASDAQ:HFWA) & Flagstar Financial (NYSE:FLG) Critical Comparison

Heritage Financial (NASDAQ:HFWA) and Flagstar Financial (NYSE:FLG) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their dividends, valuation, institutional ownership, analyst recommendations, profitability, risk and earnings.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Heritage Financial and Flagstar Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	0	2	2	0	2.50
Flagstar Financial	0	2	0	0	2.00

Heritage Financial currently has a consensus price target of $25.00, suggesting a potential upside of 2.59%. Flagstar Financial has a consensus price target of $11.75, suggesting a potential upside of 29.83%. Given Flagstar Financial’s higher possible upside, analysts plainly believe Flagstar Financial is more favorable than Heritage Financial.

Dividends

Heritage Financial pays an annual dividend of $0.92 per share and has a dividend yield of 3.8%. Flagstar Financial pays an annual dividend of $0.04 per share and has a dividend yield of 0.4%. Heritage Financial pays out 85.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Flagstar Financial pays out -0.9% of its earnings in the form of a dividend. Heritage Financial has raised its dividend for 13 consecutive years. Heritage Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

78.3% of Heritage Financial shares are held by institutional investors. Comparatively, 67.9% of Flagstar Financial shares are held by institutional investors. 1.7% of Heritage Financial shares are held by insiders. Comparatively, 6.4% of Flagstar Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Risk and Volatility

Heritage Financial has a beta of 0.55, suggesting that its share price is 45% less volatile than the S&P 500. Comparatively, Flagstar Financial has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500.

Profitability

This table compares Heritage Financial and Flagstar Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	12.27%	7.01%	0.84%
Flagstar Financial	-18.40%	-11.35%	-0.78%

Earnings & Valuation

This table compares Heritage Financial and Flagstar Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$210.51 million	3.95	$61.76 million	$1.08	22.56
Flagstar Financial	$2.93 billion	1.28	-$79.00 million	($4.36)	-2.08

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

Summary

Heritage Financial beats Flagstar Financial on 12 of the 17 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About Flagstar Financial

Flagstar Financial, Inc. operates as the bank holding company for Flagstar Bank, N.A. that provides banking products and services in the United States. The company’s deposit products include interest-bearing checking and money market, savings, non-interest-bearing, and retirement accounts, as well as certificates of deposit. Its loan products comprise multi-family loans; commercial real estate loans; acquisition, development, and construction loans; commercial and industrial loans; one-to-four family loans; specialty finance loans and leases; warehouse loans; and other loans, such as home equity lines of credit, boat and recreational vehicle indirect lending, point of sale consumer loans, and other consumer loans, including overdraft loans. The company offers cash management products; non-deposit investment and insurance products; and online banking, mobile banking, and bank-by-phone services. It primarily serves individuals, small and mid-size businesses, and professional associations. The company was formerly known as New York Community Bancorp, Inc. and changed its name to Flagstar Financial, Inc. in October 2024. Flagstar Financial, Inc. was founded in 1859 and is headquartered in Hicksville, New York.