Analyzing Security Federal (OTCMKTS:SFDL) and Simmons First National (NASDAQ:SFNC)

Security Federal (OTCMKTS:SFDL) and Simmons First National (NASDAQ:SFNC) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Dividends

Security Federal pays an annual dividend of $0.60 per share and has a dividend yield of 2.0%. Simmons First National pays an annual dividend of $0.85 per share and has a dividend yield of 4.3%. Security Federal pays out 19.2% of its earnings in the form of a dividend. Simmons First National pays out 66.9% 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. Simmons First National has raised its dividend for 14 consecutive years. Simmons First National is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Security Federal has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500. Comparatively, Simmons First National has a beta of 0.95, meaning that its stock price is 5% less volatile than the S&P 500.

Insider & Institutional Ownership

27.6% of Simmons First National shares are held by institutional investors. 36.4% of Security Federal shares are held by insiders. Comparatively, 1.9% of Simmons First National shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Security Federal and Simmons First National”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Security Federal	$87.55 million	1.12	$9.81 million	$3.12	9.82
Simmons First National	$1.46 billion	1.96	$152.69 million	$1.27	15.58

Simmons First National has higher revenue and earnings than Security Federal. Security Federal is trading at a lower price-to-earnings ratio than Simmons First National, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Security Federal and Simmons First National’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Security Federal	13.07%	11.37%	0.73%
Simmons First National	11.19%	5.23%	0.69%

Analyst Recommendations

This is a breakdown of current recommendations for Security Federal and Simmons First National, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Security Federal	0	0	0	0	0.00
Simmons First National	0	3	1	0	2.25

Simmons First National has a consensus price target of $22.75, suggesting a potential upside of 14.96%. Given Simmons First National’s stronger consensus rating and higher possible upside, analysts clearly believe Simmons First National is more favorable than Security Federal.

Summary

Simmons First National beats Security Federal on 11 of the 17 factors compared between the two stocks.

About Security Federal

Security Federal Corporation operates as the bank holding company for Security Federal Bank that provides various banking products and services. It offers various deposit products, such as savings and checking accounts, money market accounts, fixed interest rate certificates with varying maturities, and individual retirement accounts. The company provides real estate loans comprising commercial real estate loans secured by non-residential commercial properties, churches, hotels, residential developments, and multi-family dwellings; one-to-four family residential real estate loans; and construction loans and loans for the acquisition, development, and construction of residential subdivisions and commercial projects. In addition, it offers commercial and agricultural business loans secured by business equipment, furniture and fixtures, inventory, and receivables, or unsecured; and consumer loans including home improvements, residential lots, mortgage, automobiles, boats, mobile homes, recreational vehicles, and education. The company offers trust, financial planning, and financial management services; and insurance agency services, such as auto, business, and home insurance. Additionally, it invests in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances, and federal funds, as well as commercial paper and corporate debt securities. It through branch offices in Aiken, Lexington, Richland and Saluda counties in South Carolina and Columbia; and Richmond counties in Georgia. Security Federal Corporation was founded in 1922 and is headquartered in Aiken, South Carolina.

About Simmons First National

Simmons First National Corporation operates as the holding company for Simmons Bank that provides banking and other financial products and services to individuals and businesses. The company offers checking, savings, and time deposits; consumer, real estate, and commercial loans; agricultural finance, equipment, and small business administration lending; trust and fiduciary services; credit cards; investment management products; treasury management; insurance products; and securities and investment services. It also provides ATM services; Internet and mobile banking platforms; overdraft facilities; and safe deposit boxes. The company was founded in 1903 and is headquartered in Pine Bluff, Arkansas.