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Southside Bancshares

Southside Bancshares: An Undervalued Regional Bank To Buy

In the quest for yield or dividend growth, it is easy to overlook small companies. One company that I think most small investors should look at it is Southside Bancshares (SBSI), an undervalued regional bank. The bank is a Dividend Champion and is currently sporting a yield of approximately 4.5%. This is well above the current average yield of the S&P 500 at roughly 1.8%. Granted, most regional banks are being impacted by COVID-19, especially those with commercial real estate loans. But Southside is conservatively run and has solid asset quality. The stock is trading at a reasonable earnings valuation, and the stock price is still down about 25% year to date. It is trading at the same price as in mid-2016. I view the stock as a long-term buy.

Southside Bancshares
Southside Bancshares Undervalued

Overview of Southside Bancshares

Southside Bancshares is a community bank that was founded in 1960. The bank operates 59 branches and 80 ATMs in Texas. Fifteen of the branches are grocery store branches. The branches are clustered around the towns of Tyler, Dallas, Ft. Worth, Longview, and Lufkin as seen in the graphic below. The bank offers personal, commercial, and mortgage banking services. It also has a presence in wealth management and brokerage services. The bank has about 40% deposit share in Smith County and 29% in Angelina County. Southside Bancshares completed the acquisition of Diboll State Bancshares, Inc. for roughly $220 million in cash and stock at end of 2017 adding about $1 billion in assets. Currently, Southside has approximately $7,330 million in total assets, $3,853 million in total loans, and $5,071 million in total deposits.

Southside Bancshares is Growing Rapidly

Southside Bancshares is growing rapidly, driven by organic growth, expansion, and M&A. Texas is a high population growth state that is growing faster than the national average. The state has high birth rates and net inflow of migration. In turn, this leads to high organic growth in Southside’s markets. Southside also expands its branch network. Last year, it added a branch in Kingwood, which is a Houston suburb…

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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