Head to Head Survey: ConnectOne Bancorp (NASDAQ:CNOB) versus Independent Bank Group (NASDAQ:IBTX)

Independent Bank Group (NASDAQ:IBTX) and ConnectOne Bancorp (NASDAQ:CNOB) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, profitability, institutional ownership, valuation and earnings.

Dividends

Independent Bank Group pays an annual dividend of $1.52 per share and has a dividend yield of 3.5%. ConnectOne Bancorp pays an annual dividend of $0.72 per share and has a dividend yield of 4.1%. Independent Bank Group pays out 60.1% of its earnings in the form of a dividend. ConnectOne Bancorp pays out 38.1% 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. ConnectOne Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and target prices for Independent Bank Group and ConnectOne Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Independent Bank Group	0	2	4	0	2.67
ConnectOne Bancorp	0	1	2	1	3.00

Independent Bank Group presently has a consensus target price of $52.33, indicating a potential upside of 19.32%. ConnectOne Bancorp has a consensus target price of $24.00, indicating a potential upside of 35.06%. Given ConnectOne Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe ConnectOne Bancorp is more favorable than Independent Bank Group.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Independent Bank Group	10.96%	4.97%	0.63%
ConnectOne Bancorp	15.29%	7.39%	0.83%

Earnings and Valuation

This table compares Independent Bank Group and ConnectOne Bancorp’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Independent Bank Group	$922.84 million	1.97	$43.20 million	$2.53	17.34
ConnectOne Bancorp	$504.07 million	1.35	$87.00 million	$1.89	9.40

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

Risk & Volatility

Independent Bank Group has a beta of 1.41, meaning that its share price is 41% more volatile than the S&P 500. Comparatively, ConnectOne Bancorp has a beta of 1.27, meaning that its share price is 27% more volatile than the S&P 500.

Institutional & Insider Ownership

77.9% of Independent Bank Group shares are owned by institutional investors. Comparatively, 67.7% of ConnectOne Bancorp shares are owned by institutional investors. 3.5% of Independent Bank Group shares are owned by insiders. Comparatively, 6.4% of ConnectOne Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

ConnectOne Bancorp beats Independent Bank Group on 10 of the 17 factors compared between the two stocks.

About Independent Bank Group

Independent Bank Group, Inc., through its subsidiary, Independent Bank provides various commercial banking products and services to businesses, professionals, and individuals in the United States. It accepts various deposit products, including checking and savings accounts, demand deposits, money market accounts, and certificates of deposit. The company also provides commercial real estate loans; commercial construction, land, and land development loans; residential real estate loans; single-family interim construction loans; commercial loans, such as SBA guaranteed loans, business term loans, lines of credit, and energy related loans; agricultural loans for farmers and ranchers; consumer installment loans comprising loans to purchase cars, boats, and other recreational vehicles; and residential mortgages, as well as mortgage warehouse purchase loans. In addition, it offers debit and credit cards, online and mobile banking, estatement, bank-by-mail, and direct deposit services; wealth management services; and business accounts and management services consisting of analyzed business checking, business savings, and treasury management services. The company was incorporated in 2002 and is headquartered in McKinney, Texas.

About ConnectOne Bancorp

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides commercial banking products and services for small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and South Florida market. The company offers personal and business checking, money market, and time and savings accounts; credit cards, wire transfers, safe deposit boxes, automated teller services and telephone, and internet and mobile banking. It provides retirement accounts, consumers and cash management services for business clients, including treasury direct, automated clearing house, remote deposit capture, and digital invoicing. In addition, the company offers consumer and commercial business loans, including lines of credit, commercial and residential mortgages, home equity and bridge loans, and other personal loans; commercial loans secured by collateral, such as business assets comprising accounts receivable, inventory and equipment, and mortgages filed on commercial and residential real estate, as well as cash balances and marketable securities. Further, it provides real estate loans, which includes loans secured by first liens on completed commercial properties, including multi-family properties, to purchase or refinance properties; residential mortgages, such as loans secured by first liens on 1-4 family and condominium; and cooperative residential real estate loans. The company was formerly known as Center Bancorp, Inc. and changed its name to ConnectOne Bancorp, Inc. in July 2014. ConnectOne Bancorp, Inc. was incorporated in 1982 and is headquartered in Englewood Cliffs, New Jersey.