Cathay General Bancorp (NASDAQ: CATY) and Berkshire Hills Bancorp (NYSE:BHLB) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their dividends, risk, analyst recommendations, earnings, profitability, institutional ownership and valuation.

Profitability

This table compares Cathay General Bancorp and Berkshire Hills Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cathay General Bancorp 35.30% 10.54% 1.36%
Berkshire Hills Bancorp 15.03% 6.93% 0.85%

Volatility & Risk

Cathay General Bancorp has a beta of 1.27, suggesting that its share price is 27% more volatile than the S&P 500. Comparatively, Berkshire Hills Bancorp has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500.

Dividends

Cathay General Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 2.4%. Berkshire Hills Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 2.5%. Cathay General Bancorp pays out 34.6% of its earnings in the form of a dividend. Berkshire Hills Bancorp 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. Berkshire Hills Bancorp has raised its dividend for 2 consecutive years. Berkshire Hills Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Cathay General Bancorp and Berkshire Hills Bancorp’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cathay General Bancorp $475.33 million 6.00 $196.31 million $2.43 14.53
Berkshire Hills Bancorp $336.88 million 4.00 $72.74 million $1.82 18.52

Cathay General Bancorp has higher revenue and earnings than Berkshire Hills Bancorp. Cathay General Bancorp is trading at a lower price-to-earnings ratio than Berkshire Hills Bancorp, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

67.3% of Cathay General Bancorp shares are held by institutional investors. Comparatively, 62.5% of Berkshire Hills Bancorp shares are held by institutional investors. 5.8% of Cathay General Bancorp shares are held by insiders. Comparatively, 2.8% of Berkshire Hills Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations for Cathay General Bancorp and Berkshire Hills Bancorp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cathay General Bancorp 0 2 2 0 2.50
Berkshire Hills Bancorp 0 3 2 0 2.40

Cathay General Bancorp currently has a consensus target price of $40.25, indicating a potential upside of 13.99%. Berkshire Hills Bancorp has a consensus target price of $35.00, indicating a potential upside of 3.86%. Given Cathay General Bancorp’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Cathay General Bancorp is more favorable than Berkshire Hills Bancorp.

Summary

Cathay General Bancorp beats Berkshire Hills Bancorp on 13 of the 16 factors compared between the two stocks.

Cathay General Bancorp Company Profile

Cathay General Bancorp is a bank holding company. The Company holds Cathay Bank, a California state-chartered commercial bank (the Bank); seven limited partnerships investing in affordable housing investments; GBC Venture Capital, Inc., and Asia Realty Corp. The Company also owns the common stock of five statutory business trusts created for issuing capital securities. The Bank primarily services individuals, professionals and small to medium-sized businesses in the local markets and provides commercial mortgage loans, commercial loans, small business administration (SBA) loans, residential mortgage loans, real estate construction loans, home equity lines of credit and installment loans to individuals for automobile, household and other consumer expenditures. The Bank offers passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, college certificates of deposit and public funds deposits.

Berkshire Hills Bancorp Company Profile

Berkshire Hills Bancorp, Inc. (Berkshire) is a holding company for Berkshire Bank (the Bank) and Berkshire Insurance Group. Berkshire offers a range of deposit, lending, insurance and wealth management products to retail, commercial, not-for-profit and municipal customers in its market areas. Berkshire product offerings also include retail and commercial electronic banking, commercial cash management and commercial interest rate swaps. The Bank’s loan portfolio consists of commercial loans, which include residential mortgages, commercial real estate, commercial and industrial loans, and consumer loans. The Bank’s securities available for sale include municipal bonds and obligations, mortgage-backed securities, other bonds and obligations, and marketable equity securities. As of December 5, 2016, the Bank had 99 full service branch offices in Massachusetts, New York, Connecticut, Vermont, New Jersey and Pennsylvania.

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