Dime Community Bancshares (NASDAQ: DCOM) and Mercantile Bank (NASDAQ:MBWM) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.
Dime Community Bancshares pays an annual dividend of $0.56 per share and has a dividend yield of 2.6%. Mercantile Bank pays an annual dividend of $0.76 per share and has a dividend yield of 2.1%. Dime Community Bancshares pays out 56.0% of its earnings in the form of a dividend. Mercantile Bank pays out 39.8% 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.
Volatility and Risk
Dime Community Bancshares has a beta of 0.82, meaning that its stock price is 18% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.67, meaning that its stock price is 33% less volatile than the S&P 500.
Earnings and Valuation
This table compares Dime Community Bancshares and Mercantile Bank’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Dime Community Bancshares||$271.56 million||2.98||$72.51 million||$1.00||21.60|
|Mercantile Bank||$139.49 million||4.31||$31.91 million||$1.91||19.08|
Dime Community Bancshares has higher revenue and earnings than Mercantile Bank. Mercantile Bank is trading at a lower price-to-earnings ratio than Dime Community Bancshares, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
68.4% of Dime Community Bancshares shares are held by institutional investors. Comparatively, 54.2% of Mercantile Bank shares are held by institutional investors. 7.3% of Dime Community Bancshares shares are held by company insiders. Comparatively, 3.2% of Mercantile Bank shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.
This table compares Dime Community Bancshares and Mercantile Bank’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Dime Community Bancshares||16.99%||8.28%||0.77%|
This is a summary of recent recommendations and price targets for Dime Community Bancshares and Mercantile Bank, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Dime Community Bancshares||1||2||0||0||1.67|
Dime Community Bancshares presently has a consensus price target of $22.17, suggesting a potential upside of 2.62%. Mercantile Bank has a consensus price target of $34.50, suggesting a potential downside of 5.32%. Given Dime Community Bancshares’ higher possible upside, research analysts plainly believe Dime Community Bancshares is more favorable than Mercantile Bank.
Mercantile Bank beats Dime Community Bancshares on 8 of the 15 factors compared between the two stocks.
About Dime Community Bancshares
Dime Community Bancshares, Inc. operates as a holding company for Dime Community Bank (the Bank), a chartered savings bank. The Company is a unitary savings and loan holding company. The Company operates through Community Banking segment. The Bank’s principal business is gathering retail deposits, and lending them primarily in multifamily residential, commercial real estate and mixed use loans, as well as investing in mortgage-backed securities (MBS), obligations of the United States Government and Government Sponsored Entities (GSEs), and corporate debt and equity securities. The Bank’s primary sources of funds are, in general, deposits; loan amortization, prepayments and maturities; MBS amortization, prepayments and maturities; investment securities maturities and sales, and advances from the Federal Home Loan Bank of New York (FHLBNY).
About Mercantile Bank
Mercantile Bank Corporation is a bank holding company. The Company owns the Mercantile Bank of Michigan (the Bank). The Bank is a state banking company. The Bank provides commercial banking services primarily to small- to medium-sized businesses and retail banking services. The Bank makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits. The Bank also enables customers to conduct certain loan and deposit transactions by personal computer and through mobile applications. Courier service is provided to certain commercial customers, and safe deposit facilities are available at its office locations. The Bank’s commercial lending group originates commercial loans and leases primarily in its market areas. The Bank’s primary deposit products are checking, savings and term certificate accounts.
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