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Is Community Financial's (TCFC) Dividend Hike Sustainable?

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The Community Financial Corporation's (TCFC - Free Report) board of directors has announced a 17% sequential hike in the quarterly cash dividend. The company will now pay a dividend of 17.5 cents per share, up from 15 cents paid out in the prior quarter. The increased dividend will be paid out on Jan 24 to shareholders of record as of Jan 10, 2022.

Based on the increased rate, Community Financial's annual dividend came to 70 cents a share, resulting in an annualized yield of 1.9%, considering the company's closing price of $36.9 as of Nov 30.

Management noted, "Our performance in the past year has been exceptional, despite many pandemic related challenges felt across the industry and Country. This increase in the quarterly dividend reflects the strong financial position of the Company and our continued commitment to returning value to shareholders."

On Feb 25, 2021, the company had hiked its dividend by 20% to 15 cents, which was paid out on Apr 26 to shareholders of record as of Apr 12, 2021.

Community Financial's ability to sustain the hiked dividend depends on earnings growth and the payout ratio. The company's current payout ratio is 12.70%, lower than the industry's 23.13%.

TCFC's performance depicts a robust earnings picture. Community Financial's earnings have surpassed the consensus mark on all four trailing quarters. Over the next five years, TCFC's earnings are projected to grow at a 59.9% rate, higher than the industry average of 46%.

As of the third-quarter end, it had $112.3 million of cash and due from banks, significantly up from the 2020 end  figure.

These indicate that Community Financial's dividends are well-covered and TCFC can sustain its current hiked dividend.

Community Financial has a disciplined capital-allocation strategy and remains committed to increasing shareholder value through dividend hikes and share buybacks. The company also has a share repurchase program in place.  TCFC repurchased 200,550 shares of common stock for around $7 million between November 2020 and August 2021.

We believe that such disbursements highlight the company's operational strength and commitment toward rewarding shareholders handsomely. Also, 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 the stock.

Community Financial carries a Zacks Rank #3 (Hold) at present. The company has gained 36.8% compared with its industry's rally of 54% 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 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 till 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.

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