Head to Head Review: Bank of the James Financial Group (NASDAQ:BOTJ) and Bankwell Financial Group (NASDAQ:BWFG)

Bank of the James Financial Group (NASDAQ:BOTJ) and Bankwell Financial Group (NASDAQ:BWFG) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Institutional and Insider Ownership

18.5% of Bank of the James Financial Group shares are owned by institutional investors. Comparatively, 35.8% of Bankwell Financial Group shares are owned by institutional investors. 15.3% of Bank of the James Financial Group shares are owned by insiders. Comparatively, 19.2% of Bankwell Financial Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for Bank of the James Financial Group and Bankwell Financial Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of the James Financial Group	0	0	0	0	0.00
Bankwell Financial Group	0	0	1	0	3.00

Bankwell Financial Group has a consensus price target of $40.00, indicating a potential upside of 39.66%. Given Bankwell Financial Group’s stronger consensus rating and higher possible upside, analysts clearly believe Bankwell Financial Group is more favorable than Bank of the James Financial Group.

Profitability

This table compares Bank of the James Financial Group and Bankwell Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of the James Financial Group	14.46%	13.36%	0.85%
Bankwell Financial Group	7.77%	5.74%	0.48%

Valuation & Earnings

This table compares Bank of the James Financial Group and Bankwell Financial Group”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of the James Financial Group	$42.64 million	1.51	$8.70 million	$1.84	7.66
Bankwell Financial Group	$89.21 million	2.52	$36.66 million	$1.95	14.69

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

Risk & Volatility

Bank of the James Financial Group has a beta of 0.79, indicating that its share price is 21% less volatile than the S&P 500. Comparatively, Bankwell Financial Group has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.

Dividends

Bank of the James Financial Group pays an annual dividend of $0.40 per share and has a dividend yield of 2.8%. Bankwell Financial Group pays an annual dividend of $0.80 per share and has a dividend yield of 2.8%. Bank of the James Financial Group pays out 21.7% of its earnings in the form of a dividend. Bankwell Financial Group pays out 41.0% 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. Bank of the James Financial Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Bankwell Financial Group beats Bank of the James Financial Group on 11 of the 16 factors compared between the two stocks.

About Bank of the James Financial Group

Bank of the James Financial Group, Inc. operates as the bank holding company for Bank of the James that provides general retail and commercial banking services to individuals, businesses, associations and organizations, and governmental authorities in Virginia, the United States. It offers checking, savings, individual retirement, and health care saving accounts, as well as other time deposits, including money market accounts and certificates of deposit. The company also provides loans to small- and medium-sized businesses for the purchases of equipment, facilities upgrades, inventory acquisition, and various working capital purposes; commercial and residential construction and development loans; commercial real estate mortgage loans; residential mortgage loans; and secured and unsecured consumer loans, such as lines of credit and overdraft lines of credit, as well as personal, automobile, installment, demand, and home equity loans for personal, family, or household purposes. In addition, it offers other banking services, including safe deposit boxes, traveler's checks, direct deposit of payroll and social security checks, automatic drafts for various accounts, treasury management, and credit card merchant services. Further, the company provides mortgage banking; investment advisory services; securities brokerage and investment services; and telephone and internet banking services comprising online bill pay, as well as acts as an agent for insurance and annuity products. The company was founded in 1999 and is headquartered in Lynchburg, Virginia.

About Bankwell Financial Group

Bankwell Financial Group, Inc. operates as the bank holding company for Bankwell Bank that provides various banking services for individual and commercial customers. It offers various traditional depository products, including checking, savings, money market, and certificates of deposit. The company also provides first mortgage loans secured by one-to-four family owner occupied residential properties for personal use; home equity loans and home equity lines of credit secured by owner occupied one-to-four family residential properties; loans secured by commercial real estate, multi-family dwellings, owner-occupied commercial real estate, and investor-owned one-to-four family dwellings; commercial construction loans for commercial development projects, including apartment buildings and condominiums, as well as office buildings, retail, and other income producing properties; land loans; commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners; loans to finance insurance premiums; overdraft lines of credit; and unsecured personal loans. It operates branches in New Canaan, Stamford, Fairfield, Westport, Darien, Norwalk, and Hamden, Connecticut. The company was formerly known as BNC Financial Group, Inc. and changed its name to Bankwell Financial Group, Inc. in September 2013. Bankwell Financial Group, Inc. was founded in 2002 and is headquartered in New Canaan, Connecticut.