Critical Contrast: Southside Bancshares (SBSI) versus Webster Financial Corporation (WBS)

Southside Bancshares (NASDAQ: SBSI) and Webster Financial Corporation (NYSE:WBS) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, risk, analyst recommendations, profitability, valuation and dividends.

Institutional & Insider Ownership

51.4% of Southside Bancshares shares are owned by institutional investors. Comparatively, 93.9% of Webster Financial Corporation shares are owned by institutional investors. 17.2% of Southside Bancshares shares are owned by insiders. Comparatively, 2.2% of Webster Financial Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Southside Bancshares and Webster Financial Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Southside Bancshares 0 2 0 0 2.00
Webster Financial Corporation 1 6 2 0 2.11

Southside Bancshares currently has a consensus price target of $37.00, suggesting a potential upside of 8.76%. Webster Financial Corporation has a consensus price target of $54.88, suggesting a potential upside of 4.94%. Given Southside Bancshares’ higher possible upside, equities research analysts plainly believe Southside Bancshares is more favorable than Webster Financial Corporation.

Earnings and Valuation

This table compares Southside Bancshares and Webster Financial Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Southside Bancshares $208.32 million 4.81 $49.34 million $1.91 17.84
Webster Financial Corporation $1.09 billion 4.43 $207.12 million $2.53 20.67

Webster Financial Corporation has higher revenue and earnings than Southside Bancshares. Southside Bancshares is trading at a lower price-to-earnings ratio than Webster Financial Corporation, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Southside Bancshares has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500. Comparatively, Webster Financial Corporation has a beta of 1.23, suggesting that its stock price is 23% more volatile than the S&P 500.

Profitability

This table compares Southside Bancshares and Webster Financial Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Southside Bancshares 25.70% 10.32% 1.00%
Webster Financial Corporation 21.09% 9.89% 0.93%

Dividends

Southside Bancshares pays an annual dividend of $1.12 per share and has a dividend yield of 3.3%. Webster Financial Corporation pays an annual dividend of $1.04 per share and has a dividend yield of 2.0%. Southside Bancshares pays out 58.7% of its earnings in the form of a dividend. Webster Financial Corporation pays out 41.1% 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. Southside Bancshares has raised its dividend for 19 consecutive years and Webster Financial Corporation has raised its dividend for 6 consecutive years. Southside Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Webster Financial Corporation beats Southside Bancshares on 9 of the 17 factors compared between the two stocks.

About Southside Bancshares

Southside Bancshares, Inc. (Southside) is a bank holding company for Southside Bank (the Bank). The Company is a community-focused financial institution that offers a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations in the communities. These services include consumer and commercial loans, deposit accounts, trust services, safe deposit services and brokerage services. As of December 31, 2016, the Company operated through 60 banking centers, 17 of which are located in grocery stores. The Company offers a range of deposit accounts with a range of interest rates and terms, including savings, money market, interest and non-interest bearing checking accounts and certificates of deposit (CDs).

About Webster Financial Corporation

Webster Financial Corporation is a bank and financial holding company. The Company’s segments include Commercial Banking, Community Banking, HSA Bank, Private Banking, and Corporate and Reconciling. The Commercial Banking segment includes middle-market, asset-based lending, commercial real estate, equipment finance, and treasury and payment solutions, which includes government and institutional banking. The Community Banking segment consists of its Personal Banking and Business Banking segments. HSA Bank, a division of its subsidiary, Webster Bank, National Association, offers health savings accounts, health reimbursement accounts, flexible spending accounts, and other financial solutions. Private Banking serves high-net-worth clients, not-for-profit organizations, and business clients with asset management, trust, loan and deposit products, and financial planning services. Its treasury unit and consumer-liquidating portfolio are included in the Corporate and Reconciling segment.

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