Reviewing Sound Financial Bancorp (NASDAQ:SFBC) and Sierra Bancorp (NASDAQ:BSRR)

Sound Financial Bancorp (NASDAQ:SFBC) and Sierra Bancorp (NASDAQ:BSRR) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, earnings, profitability, analyst recommendations, risk and valuation.

Insider & Institutional Ownership

68.9% of Sound Financial Bancorp shares are held by institutional investors. Comparatively, 55.4% of Sierra Bancorp shares are held by institutional investors. 12.4% of Sound Financial Bancorp shares are held by company insiders. Comparatively, 11.9% of Sierra Bancorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Sound Financial Bancorp pays an annual dividend of $0.76 per share and has a dividend yield of 1.7%. Sierra Bancorp pays an annual dividend of $1.00 per share and has a dividend yield of 3.4%. Sound Financial Bancorp pays out 39.0% of its earnings in the form of a dividend. Sierra Bancorp pays out 35.5% 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. Sound Financial Bancorp has raised its dividend for 2 consecutive years and Sierra Bancorp has raised its dividend for 2 consecutive years. Sierra 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 recommmendations for Sound Financial Bancorp and Sierra Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sound Financial Bancorp	0	0	0	0	0.00
Sierra Bancorp	0	1	1	0	2.50

Sierra Bancorp has a consensus price target of $33.50, suggesting a potential upside of 12.49%. Given Sierra Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe Sierra Bancorp is more favorable than Sound Financial Bancorp.

Volatility and Risk

Sound Financial Bancorp has a beta of 0.23, suggesting that its share price is 77% less volatile than the S&P 500. Comparatively, Sierra Bancorp has a beta of 0.74, suggesting that its share price is 26% less volatile than the S&P 500.

Profitability

This table compares Sound Financial Bancorp and Sierra Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sound Financial Bancorp	8.12%	4.89%	0.48%
Sierra Bancorp	19.92%	11.38%	1.11%

Earnings & Valuation

This table compares Sound Financial Bancorp and Sierra Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sound Financial Bancorp	$62.03 million	1.91	$4.64 million	$1.95	23.59
Sierra Bancorp	$203.87 million	2.02	$40.56 million	$2.82	10.56

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

Summary

Sierra Bancorp beats Sound Financial Bancorp on 13 of the 16 factors compared between the two stocks.

About Sound Financial Bancorp

Sound Financial Bancorp, Inc. operates as the bank holding company for Sound Community Bank that provides banking and other financial services for consumers and businesses. It accepts various deposits products comprising savings, money market deposit, NOW, and demand accounts, as well as certificates of deposit. The company also offers loans secured by first and second mortgages on one-to four-family residences; home equity loans, including fixed-rate loans and variable-rate lines of credit; commercial and multifamily real estate loans; construction loans secured by single-family residences, and commercial and multifamily real estate; land loans; commercial business loans to finance commercial vehicles and equipment, as well as loans secured by accounts receivable and/or inventory; and secured and unsecured consumer loans, such as new and used manufactured homes, floating homes, automobiles, boats, and recreational vehicle loans, and loans secured by deposit accounts. The company was founded in 1953 and is headquartered in Seattle, Washington.

About Sierra Bancorp

Sierra Bancorp operates as the bank holding company for Bank of the Sierra that provides retail and commercial banking services to individuals and businesses in California. It accepts various deposit products, such as checking accounts, savings accounts, money market demand accounts, time deposits, retirement accounts, and sweep accounts. The company's loan products include agricultural, commercial, consumer, real estate, construction, and mortgage loans. It also offers automated teller machines; electronic point-of-sale payment alternatives; online and automated telephone banking services; and remote deposit capture and automated payroll services for business customers. Sierra Bancorp was founded in 1977 and is headquartered in Porterville, California.