Prosperity Bancshares (NYSE: PB) and Washington Trust Bancorp (NASDAQ:WASH) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, dividends, profitability, earnings, valuation, institutional ownership and analyst recommendations.

Dividends

Prosperity Bancshares pays an annual dividend of $1.36 per share and has a dividend yield of 2.1%. Washington Trust Bancorp pays an annual dividend of $1.56 per share and has a dividend yield of 2.8%. Prosperity Bancshares pays out 34.4% of its earnings in the form of a dividend. Washington Trust Bancorp pays out 54.0% 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. Washington Trust Bancorp has increased its dividend for 13 consecutive years. Washington Trust Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

72.0% of Prosperity Bancshares shares are owned by institutional investors. Comparatively, 55.2% of Washington Trust Bancorp shares are owned by institutional investors. 4.9% of Prosperity Bancshares shares are owned by insiders. Comparatively, 2.6% of Washington Trust Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Prosperity Bancshares and Washington Trust Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Prosperity Bancshares 34.79% 7.38% 1.23%
Washington Trust Bancorp 23.63% 12.56% 1.14%

Analyst Ratings

This is a summary of recent ratings and price targets for Prosperity Bancshares and Washington Trust Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Prosperity Bancshares 1 7 2 0 2.10
Washington Trust Bancorp 0 2 0 0 2.00

Prosperity Bancshares currently has a consensus price target of $71.05, indicating a potential upside of 8.01%. Washington Trust Bancorp has a consensus price target of $55.00, indicating a potential downside of 0.90%. Given Prosperity Bancshares’ stronger consensus rating and higher possible upside, equities analysts plainly believe Prosperity Bancshares is more favorable than Washington Trust Bancorp.

Risk & Volatility

Prosperity Bancshares has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500. Comparatively, Washington Trust Bancorp has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.

Earnings and Valuation

This table compares Prosperity Bancshares and Washington Trust Bancorp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Prosperity Bancshares $720.90 million 6.34 $274.47 million $3.95 16.65
Washington Trust Bancorp $174.06 million 5.49 $49.74 million $2.89 19.20

Prosperity Bancshares has higher revenue and earnings than Washington Trust Bancorp. Prosperity Bancshares is trading at a lower price-to-earnings ratio than Washington Trust Bancorp, indicating that it is currently the more affordable of the two stocks.

Summary

Prosperity Bancshares beats Washington Trust Bancorp on 13 of the 17 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. is a financial holding company, which operates through its bank subsidiary, Prosperity Bank (the Bank). The Bank provides a range of financial products and services to small and medium-sized businesses and consumers. The Company, through the Bank, offers a range of loan and deposit products to its customers. At December 31, 2016, the Bank maintained approximately 598,400 separate deposit accounts including certificates of deposit and 53,600 separate loan accounts. It offered commercial real estate (including multifamily residential) and one- to four-family residential loans, as of December 31, 2016. As of December 31, 2016, the Bank operated 245 full service banking locations; 65 in the Houston area; 29 in the South Texas area; 36 in the Dallas/Fort Worth area; 22 in the East Texas area; 29 in the Central Texas area; 34 in the West Texas area; 16 in the Bryan/College Station area, six in the Central Oklahoma area and eight in the Tulsa, Oklahoma area.

About Washington Trust Bancorp

Washington Trust Bancorp, Inc. is a bank holding company and financial holding company. The Company is a holding company of The Washington Trust Company, of Westerly (the Bank), a Rhode Island chartered commercial bank. The Company operates through two business segments: Commercial Banking and Wealth Management Services. The Company offers a range of product lines of banking and financial services to individuals and businesses, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut; its automated teller machines (ATMs); telephone banking; mobile banking and its Internet Website (www.washtrust.com). Its investment securities portfolio amounted to $755.5 million, as of December 31, 2016. The Company’s total loan portfolio amounted to $3.2 billion, as of December 31, 2016.

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