Looking Beyond Chuck's Earnings

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Charles Schwab (NYSE: SCHW  ) produced a 16% rise in year-over-year profit in its latest quarterly results. Its smart acquisitions and strong performance have already made me bullish about it. Now I've decided to put it through the wringer to see whether it deserves space in my portfolio.

Despite sluggish trading activity across the brokerage industry, Schwab came away with a fruitful quarter. Higher asset management and interest revenue helped the company increase its net income by $33 million from the same quarter a year ago. Revenue rose 10% to $1.19 billion. Trading has slowed a bit, but that recent trend was offset by Schwab clients gravitating to higher-margin services like advisory solutions, along with more assets under management.

The table below gives you an idea of how Chuck scores from an investment standpoint when compared to its peers:




Dividend Yield

Payout Ratio

Charles Schwab 25.0 2.8 1.5% 40%
E*TRADE (Nasdaq: ETFC  ) 55.3 0.8 0.0% NA
TD AMERITRADE (Nasdaq: AMTD  ) 17.8 2.6 1.0% 15%
GFI Group (NYSE: GFIG  ) 32.8 1.2 4.3% 321%
Source: Capital IQ, a Standard & Poor's company. TTM = trailing 12 months.

Schwab's price-to-earnings ratio is better than those of E*TRADE and GFI Group. But TD AMERITRADE scores the cheapest multiple of the four.

Schwab also offers a better dividend yield than most of its peers. Although GFI's yield is the highest of the four, its payout ratio is also high, suggesting that the dividend may be unsustainable.

With its acquisition of optionsXpress (Nasdaq: OXPS  ) , Schwab is shaping up to have an exciting next few years in terms of growth. Though the optionsXpress deal has been the big focus recently, Schwab seems to have other plans to catalyze growth. For example, it's partnering with Broadridge Financial (NYSE: BR  ) to help strengthen its position in offering better access to the global investment trading market. Schwab appears to be a company with a compelling future, and that makes me all the more intrigued looking at its current numbers.

With strong fundamentals, stable returns, and impressive earnings, I continue to hold my optimistic view of the company.

Are you shopping for a broker? Learn more about what top companies can offer you in our Broker Center.

Fool contributor Zeeshan Siddique does not own any of the stocks mentioned in the article. The Fool owns shares of and has written puts on Broadridge Financial. Motley Fool newsletter services have recommended buying shares of Schwab and optionsXpress. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (11)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2011, at 9:48 PM, borjemoi wrote:

    Intersting. You've an article about Schwab, but in the comparative listing of brokers, elsewhare on this site, Schwab is curiously missing.

    It has one particular asset for me: I have three business days to pay for a stock purchase. TD Ameritrade and Scott have to have the money on hand prior to stock purchase. At 0.01% interest on a limit order, that's unpleasant.

  • Report this Comment On August 10, 2011, at 10:04 PM, mm5525 wrote:

    Chuck rocks. I've been with them for well over a decade. Never have had a problem.

  • Report this Comment On August 12, 2011, at 9:55 AM, lflb56 wrote:
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Related Tickers

10/21/2016 4:02 PM
SCHW $32.27 Up +0.10 +0.31%
Charles Schwab CAPS Rating: *****
AMTD $37.08 Up +0.44 +1.20%
TD Ameritrade CAPS Rating: *****
BR $64.36 Up +0.19 +0.30%
Broadridge Financi… CAPS Rating: ****
ETFC $29.50 Up +1.30 +4.61%
E*TRADE Financial… CAPS Rating: ***
GFIG $0.00 Down +0.00 +0.00%
GFI Group, Inc. CAPS Rating: No stars
OXPS.DL $12.60 Down +0.00 +0.00%
optionsXpress CAPS Rating: ****