Contrasting Independent Bank (NASDAQ:INDB) & Preferred Bank (NASDAQ:PFBC)

Preferred Bank (NASDAQ:PFBC) and Independent Bank (NASDAQ:INDB) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their dividends, profitability, valuation, institutional ownership, risk, earnings and analyst recommendations.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Preferred Bank and Independent Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	5	2	0	2.29
Independent Bank	1	1	4	1	2.71

Preferred Bank currently has a consensus target price of $106.25, suggesting a potential upside of 0.79%. Independent Bank has a consensus target price of $91.86, suggesting a potential upside of 11.69%. Given Independent Bank’s stronger consensus rating and higher probable upside, analysts plainly believe Independent Bank is more favorable than Preferred Bank.

Volatility and Risk

Preferred Bank has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500.

Earnings & Valuation

This table compares Preferred Bank and Independent Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$505.97 million	3.01	$133.63 million	$10.94	9.64
Independent Bank	$1.17 billion	3.33	$205.12 million	$5.54	14.84

Independent Bank has higher revenue and earnings than Preferred Bank. Preferred Bank is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

72.8% of Preferred Bank shares are held by institutional investors. Comparatively, 83.4% of Independent Bank shares are held by institutional investors. 1.6% of Independent Bank shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.0%. Independent Bank pays an annual dividend of $2.56 per share and has a dividend yield of 3.1%. Preferred Bank pays out 29.3% of its earnings in the form of a dividend. Independent Bank pays out 46.2% 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. Preferred Bank has raised its dividend for 5 consecutive years and Independent Bank has raised its dividend for 15 consecutive years. Independent Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Preferred Bank and Independent Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.54%	17.27%	1.77%
Independent Bank	20.31%	9.19%	1.31%

Summary

Independent Bank beats Preferred Bank on 13 of the 18 factors compared between the two stocks.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About Independent Bank

Independent Bank Corp. operates as the bank holding company for Rockland Trust Company that provides commercial banking products and services to individuals and small-to-medium sized businesses in the United States. The company provides interest checking, money market, and savings accounts, as well as demand deposits and time certificates of deposit. It offers commercial real estate and construction, commercial and industrial, small business, secured and unsecured commercial, and consumer real estate loans; term loans and revolving/nonrevolving lines of credit; overdraft protection and letters of credit; and residential mortgages and home equity loans and lines. In addition, the company provides cash management services, such as ACH transaction processing, positive pay, and remote deposit services; investment management and trust services to individuals, institutions, small businesses, and charitable institutions; mobile, online, and telephone banking; estate settlement, financial planning, tax services, and other services; automated teller machines; debit and credit cards; and mutual fund and unit investment trust shares, third party model portfolios, general securities, fixed and variable annuities, and life insurance products, as well as advisory platforms. Further, it invests in low-income housing tax credit projects; holds, maintains, and disposes foreclosed properties; and operates as an investment advisor. Independent Bank Corp. was founded in 1907 and is headquartered in Rockland, Massachusetts.