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TowneBank (TOWN) Announces 11% Dividend Hike: Is it Worth a Look?

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TowneBank’s (TOWN - Free Report) board of directors has approved an 11.1% hike in the company’s quarterly common stock dividend. The revised dividend now totals 20 cents per share compared with the previous figure of 18 cents. The amount will be paid out on Jul 9 to shareholders on record as of Jun 30, 2021.

Considering the last day’s closing price of $31.96 per share, the dividend yield is currently valued at 2.5%. This yield is not only attractive to income investors but also represents a steady income stream.

Since 2017, TowneBank has been increasing its dividend annually, with 2020 being an exception on account of the pandemic. Prior to the current hike, the company had raised the dividend by 12.5% in 2019. This reflects the bank’s commitment to return value to shareholders with its robust cash-generation competencies.

Investors interested in this Zacks Rank #2 (Buy) stock can take a look at the company’s fundamentals and growth opportunities. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Strength: TowneBank witnessed earnings growth of 10.88% in the last three to five years. This earnings momentum is likely to continue in the near term as indicated by the company’s projected EPS growth rate (F1/F0) of 24.9% for 2021.

Revenue Growth: The company’s organic growth seems impressive. TowneBank’s revenues witnessed a CAGR of 16.1% over the last five years (2016-2020). Driven by efforts to grow business, the company’s top line is expected to continue rising.

Solid Balance Sheet: As of Mar 31, 2021, its cash and due from banks were $141.5 million. Also, the bank had no long-term debt as of the same date. Therefore, the company’s earnings stability and strong cash position indicate a lesser likelihood of default of interest and debt repayments, if the economic situation worsens.    

Superior Return on Equity (ROE): The company’s ROE of 10.76% compares favorably with the industry’s 9.97%, reflecting that it reinvests its cash more efficiently than peers.

Price Performance: Shares of TowneBank have gained 40.4% over the past six months compared with 45.7% growth of the industry it belongs to.


Zacks Investment ResearchImage Source: Zacks Investment Research


Other Finance Stocks Taking Similar Actions

Over the past few months, several finance companies have announced hikes in their quarterly dividends. Some of these are Saratoga Investment (SAR - Free Report) , MVB Financial (MVBF - Free Report) and Alerus Financial (ALRS - Free Report) .

Saratoga raised its quarterly dividend by 2.3%, while MVB Financial increased it by 20%. Furthermore, Alerus has announced a 6.7% hike in its dividend.

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