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Saratoga Investment (SAR) Hikes Quarterly Dividend by 1.9%

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Saratoga Investment Corp.'s (SAR - Free Report) board of directors has announced a 1.9% sequential hike in the dividend for the fiscal third quarter ended Nov 30, 2021. The company will now pay a dividend of 53 cents per share, up from 52 cents paid out in the prior quarter. The increased dividend will be paid out on Jan 19 to shareholders of record as of Jan 4, 2022. This marks the fourth dividend hike in fiscal 2022.

Based on the increased rate, the annual dividend came to $2.12 a share, resulting in an annualized yield of 7.3%, considering the company's closing price of $28.9 as of Nov 30.

Management noted, "Our continued strong track record, superior portfolio performance, healthy credit profile, robust deal pipeline, and ongoing asset growth are key attributes of our ability to deliver consistent financial performance and support a program of paying attractive and increasing quarterly dividends."

Can Saratoga Investment Maintain Its Payout?

Saratoga Investment's ability to sustain the hiked dividend depends on earnings growth and the payout ratio. The company's current payout ratio is 76.9%, lower than the industry's 87.7%.

Additionally, Saratoga Investment's performance depicts a robust earnings picture. Saratoga Investment's earnings have surpassed the consensus mark on all four trailing quarters. Over the next five years, SAR's earnings are projected to grow at a 12.9% rate, higher than the industry average of 0.8%.

As of the fiscal second-quarter end (Aug 31, 2021), Saratoga Investment had $229.3 million of total liquidity. This consisted of $73.3 million in cash and cash equivalents, the availability of $45 million under its credit facility, and $111 million in undrawn SBA debentures from the recently-approved SBIC II license to finance new SBIC-eligible portfolio companies.

These indicate that Saratoga Investment's dividends are well-covered and will sustain its current hiked dividend.

Saratoga Investment has a disciplined capital-allocation strategy and it is committed to increasing shareholder value through dividend hikes and share buybacks. SAR also has a share repurchase program in place and repurchased 49,623 shares of common stock for $1.3 million in the six months ended Aug 31, 2021.

Conclusion

Since the launch of its dividend policy to pay out regular dividends in 2014, Saratoga Investment has consistently increased the dividend by 211% until last year-end deferral. We believe that such disbursements highlight SAR's operational strength and commitment toward rewarding shareholders handsomely.

Lastly, as investors are always on the lookout for companies with a track record of consistent and incremental dividend payments to betting their money on, solid dividend payouts are arguably the biggest enticement for such investors. Such moves also boost shareholders' confidence in SAR.

SAR carries a Zacks Rank #3 (Hold) at present. The company has gained 30.7% compared with its industry's rally of 26.5% over the past year.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Other Companies Undertaking Enhanced Capital Deployment Actions

Over the past few months, several banks have rewarded shareholders with new share-repurchase programs or dividend hikes. Some of these are Farmers National Banc Corp. (FMNB - Free Report) , United Community Banks, Inc. (UCBI - Free Report) and Bank OZK (OZK - Free Report) .

Farmers National announced a sequential hike in the quarterly dividend of 27.3% to 14 cents per share. The dividend will be paid out on Dec 31 to shareholders of record as of Dec 10, 2021.

This marks the 6th consecutive quarter of an increase by Farmers National. Prior to this, FMNB had hiked the dividend by 10% to 11 cents per share.

Farmers National's management noted, "since 2015, our annual cash dividend has increased at an impressive 26% compound annual growth rate, reflecting our strong financial results and commitment to returning capital to shareholders."

United Community Banks announced a new share repurchase plan, under which it is authorized to buy back up to $50 million outstanding shares. The plan will expire on Dec 31, 2022.

The new repurchase plan replaces the previous one, which authorized United Community Banks to buy back up to $50 million shares by Dec 31, 2021. As of Sep 30, 2021, UCBI had the authorization to repurchase shares worth $34.9 million remaining under the earlier plan.

Bank OZK declared a quarterly cash dividend of 29 cents per share, reflecting a rise of 1.8% from the prior payout. The dividend was paid out on Oct 22 to shareholders of record as of Oct 15, 2021.

This was the 45th consecutive quarter of a dividend hike by Bank OZK. Prior to this, the company had hiked its dividend by 1.8% to 28.5 cents per share in July.