Southside: Banking on Texas

06/08/2020 5:00 am EST

Focus: FINANCIALS

Prakash Kolli

Founder and Author, Dividend Power

Southside Bancshares Inc (SBSI) is a smaller regional bank that operates in Texas. Like many regional banks the stock price is depressed — down over 22% year-to-date, notes Prakash Kolli, income specialist and editor of Dividend Power.

Southside Bancshares is a community bank that was founded in 1960 and is headquartered in Tyler, TX. The bank operates 60 branches and 82 ATMs in Texas. The branches are clustered around the towns of Tyler, Dallas, Ft. Worth, Longview, and Lufkin.

Regional banks like Southside Bancshares are being affected by low interest rates and COVID-19. Low interest rates are expected to reduce the net interest margin for regional banks leading to lower profitability.

Pressure on net interest margins is projected to occur since loans will reprice lower while banks will have difficulty lowering deposit rates.

Additionally, the spread between deposit rates and short-term interest notes will decline. The combined effect is to reduce income for regional banks. With that said, Southside Bancshares is seemingly a conservatively run bank with decent asset quality.

For investors interested in a solid income stock with dividend growth Southside Bancshares pays an annual forward dividend of $1.24 and is yielding approximately 4.3% at the moment.

The bank also typically pays an annual special dividend adding to the attraction. Southside Bancshares has raised the dividend for 25 consecutive years.

The bank will likely have a challenging year in 2020. But Southside Bancshares should be of interest for those seeking an income stock with dividend growth. The current yield is attractive, and the bank has a long track record of raising the dividend.

The stock price is at levels last seen in late 2016. Southside Bancshares could be a bargain for those seeking a solid income stock with some dividend growth. I view the stock as a long-term buy.

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