Critical Survey: Independent Bank (NASDAQ:INDB) & Meridian (NASDAQ:MRBK)

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

Dividends

Meridian pays an annual dividend of $0.56 per share and has a dividend yield of 2.9%. Independent Bank pays an annual dividend of $2.56 per share and has a dividend yield of 3.2%. Meridian pays out 27.2% 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. 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.

Volatility & Risk

Meridian has a beta of 0.64, meaning that its stock price is 36% less volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Meridian and Independent Bank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Meridian	1	0	3	0	2.50
Independent Bank	1	1	4	1	2.71

Meridian currently has a consensus price target of $22.00, suggesting a potential upside of 14.94%. Independent Bank has a consensus price target of $91.86, suggesting a potential upside of 15.12%. Given Independent Bank’s stronger consensus rating and higher probable upside, analysts plainly believe Independent Bank is more favorable than Meridian.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Meridian	11.89%	12.29%	0.95%
Independent Bank	20.31%	9.19%	1.31%

Insider & Institutional Ownership

58.6% of Meridian shares are owned by institutional investors. Comparatively, 83.4% of Independent Bank shares are owned by institutional investors. 14.1% of Meridian shares are owned by company insiders. Comparatively, 1.6% of Independent Bank shares are owned by company 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.

Valuation and Earnings

This table compares Meridian and Independent Bank”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Meridian	$130.22 million	1.75	$21.84 million	$2.06	9.29
Independent Bank	$1.17 billion	3.23	$205.12 million	$5.54	14.40

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

Summary

Independent Bank beats Meridian on 15 of the 18 factors compared between the two stocks.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.

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.