If you think the banking sector is headed for a rally and you're partial to dividend stocks, then your options are somewhat limited right now. The Federal Reserve has capped dividends at the 100 largest banks to the average net income of the trailing four quarters. Furthermore, they told these banks in the third quarter to not issue dividends that exceed their second-quarter dividends. These restrictions will last until at least next year. However, there are still some banks increasing their dividends. Here are four.
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Bank OZK
The $26.4 billion Bank OZK (OZK +1.34%), based in Little Rock, Arkansas, recently increased its quarterly dividend to $0.275 per share, or roughly 0.92% higher than the dividend paid in the prior quarter. Bank OZK has now raised its dividend in each of the last 41 quarters. Trading at $21.90 as of Monday's close, the bank has an annual dividend yield of about 4.9%. Bank OZK is currently trading at about 69% of book value, and its stock price is down roughly 28% year to date.
Bank OZK has proven to be a strong dividend stock, but it's a bit riskier as a bank, with about 72% of its loans tied up in the commercial sector. Its largest segment of loans is also construction loans, which can be toward the riskier side of the spectrum. So I would take a close look at its credit quality before investing.
Glacier Bancorp
The nearly $17 billion asset Glacier Bancorp (GBCI +2.22%) is based in Kalispell, Montana, but also operates in Idaho, Colorado, Wyoming, Utah, Nevada, Arizona, and Washington state. The bank recently increased its dividend to $0.30 per share, a 3.4% increase from the prior quarter. Trading at $34.68 per share as of Monday, the bank has an annual dividend yield of 3.3%. The bank is currently trading at 150% of book value, a rarity in today's world of depressed bank valuations. The stock is down about 25% year to date.
This is a bank that has really not been slowed by the pandemic. In the second quarter, earnings grew 21% year over year. The bank also only has about 66% of its assets tied up in loans, so it may not be as susceptible to losses as other banks, making it look like an attractive investment opportunity.
BancFirst Corp.
The $9.6 billion asset BancFirst Corp. (BANF 0.02%), based in Oklahoma City, recently increased its quarterly dividend to $0.34 per share, an increase of 6.25% from the second quarter. At Monday's closing price of $44.16, BancFirst has an annual dividend yield of 3%. The bank is currently valued at 139% of book value and is down about 29% year to date.
BancFirst definitely has a lot of attractive characteristics, such as lots of non-interest-bearing deposits and a solid non-interest income revenue base. But being based in Oklahoma, it is also subject to the local economy. More than 7.7% of its total loan book is tied to the energy sector, which has struggled this year, so definitely take a careful look before investing.
Hingham Institution For Savings
The smallest bank in the group, the $2.6 billion asset Hingham Institution For Savings (HIFS +1.93%), based in Hingham, Massachusetts, recently increased its dividend of $0.45 per share, up 5% from the previous quarter. Notably, the bank also typically declares a special cash dividend in the fourth quarter to be paid in the first quarter of the new year. Last year, that special dividend was $1.01 per share. Currently trading at $198.02 per share, the bank has an annual dividend yield of roughly 0.9%. The bank is currently trading at 160% of book value, and the stock is only down 6% year to date.
Although on the expensive side, this is definitely a stock I would invest in, with attractive investor returns even during the pandemic, and a crazy low efficiency ratio, which means the bank is really good at managing expenses and generating more revenue with less.
