Summit Financial Group (NASDAQ: SMMF) and Independent Bank Corp. (NASDAQ:INDB) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.

Dividends

Summit Financial Group pays an annual dividend of $0.44 per share and has a dividend yield of 2.0%. Independent Bank Corp. pays an annual dividend of $1.28 per share and has a dividend yield of 1.9%. Summit Financial Group pays out 39.3% of its earnings in the form of a dividend. Independent Bank Corp. pays out 43.7% 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. Summit Financial Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Summit Financial Group and Independent Bank Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Summit Financial Group 14.75% 11.57% 1.04%
Independent Bank Corp. 23.17% 9.70% 1.09%

Institutional & Insider Ownership

21.4% of Summit Financial Group shares are held by institutional investors. Comparatively, 76.5% of Independent Bank Corp. shares are held by institutional investors. 22.8% of Summit Financial Group shares are held by insiders. Comparatively, 2.7% of Independent Bank Corp. shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Summit Financial Group and Independent Bank Corp.’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Summit Financial Group $68.71 million 3.96 $13.92 million $1.12 19.57
Independent Bank Corp. $316.23 million 5.92 $80.39 million $2.93 23.29

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

Risk and Volatility

Summit Financial Group has a beta of 1.02, indicating that its stock price is 2% more volatile than the S&P 500. Comparatively, Independent Bank Corp. has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Summit Financial Group and Independent Bank Corp., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Summit Financial Group 0 1 1 0 2.50
Independent Bank Corp. 0 3 1 0 2.25

Summit Financial Group presently has a consensus price target of $24.50, suggesting a potential upside of 11.77%. Independent Bank Corp. has a consensus price target of $68.67, suggesting a potential upside of 0.61%. Given Summit Financial Group’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Summit Financial Group is more favorable than Independent Bank Corp..

Summary

Independent Bank Corp. beats Summit Financial Group on 8 of the 15 factors compared between the two stocks.

About Summit Financial Group

Summit Financial Group, Inc. (Summit) is a financial holding company. The Company provides community banking services primarily in the Eastern Panhandle and South Central regions of West Virginia and the Shenandoah Valley, and Northern region of Virginia. The Company provides these services through its community bank subsidiary, Summit Community Bank (Summit Community or the Bank). The Company operates through two segments: community banking, and insurance & financial services. The community banking segment consists of its full service banks, which offer customers traditional banking products and services through various delivery channels. The insurance & financial services segment includes three insurance agency offices that sell insurance products. The Company also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia, which provides insurance brokerage services to individuals and businesses.

About Independent Bank Corp.

Independent Bank Corp. is a bank holding company. The Company operates through its subsidiary, Rockland Trust Company (the Bank). The Bank is a community-oriented commercial bank. Its community banking business provides a range of banking services, including lending activities, acceptance of demand, savings, and time deposits, and investment management. As of December 31, 2016, the bank had operated 80 full service and three limited service retail branches, 11 commercial banking centers, five investment management offices and one mortgage lending center, all of which located in Eastern Massachusetts. The Bank classifies loans as commercial loans, consumer real estate loans, or other consumer loans. Commercial loans consist of commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business loans. The Bank offers a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.

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