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Bank OZK Announces 4% Dividend Hike: Is it Worth a Look?

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Maintaining its dividend hike streak, Bank OZK OZK has raised regular quarterly cash dividend by 4% to 26 cents per share. It will be paid out on Jan 24 to shareholders on record as of Jan 17, 2020.

This marks the 38th consecutive quarter of dividend hike by the company. Prior to this, it hiked its dividend by 4.17% to 25 cents per share.

Considering last day’s closing price of $30.80, Bank OZK’s dividend yield currently stands at 3.38%. Not only is the yield attractive for income investors but it also represents a steady income stream.

Given a robust capital position as well as lower debt-equity and dividend payout ratios compared with its peers, the company is expected to sustain its capital deployment activities. Hence, through consistent dividend payments, it is likely to continue enhancing shareholder value.

However, let’s see whether it is worth considering Bank OZK stock based on this dividend income. A deeper research into the bank’s financial performance and fundamentals will help understand the risks and rewards.

Given its strong balance sheet position, the bank is expected to continue expanding through acquisitions. It also plans to open additional branches in new and existing markets.

Further, Bank OZK looks undervalued based on price-to-earnings (P/E) and price-to-book (P/B) ratios. The company currently has a P/E ratio of 9.36 and P/B ratio of 0.96, which are below the industry average of 13.10 and 1.25, respectively. Also, the stock has a Value Score of B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential.

Based on the above-mentioned factors, the stock seems worth investing in, but one must consider the following downsides before taking the final decision.

Margin pressure, mainly due to reduction of the high yielding purchased loan portfolio, is a major near-term concern and might hurt top-line growth.

Also, mounting non-interest expenses pose a concern for the company. As it continues to expand inorganically and open branches in newer areas, overall expenses are expected to remain elevated.

The stock has gained 5.2% over the past six months, underperforming the industry’s growth of 6.2%.

Currently, Bank OZK carries a Zacks Rank #4 (Sell).

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

Some other finance stocks, which raised their dividends during the past four months, are M&T Bank Corporation MTB, Franklin Resources BEN and United Bankshares, Inc UBSI. M&T Bank raised its quarterly dividend by 10% while Franklin raised the same by 4%. United Bankshares announced a 3% rise in its common stock dividend.

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M&T Bank Corporation (MTB) : Free Stock Analysis Report
 
United Bankshares, Inc. (UBSI) : Free Stock Analysis Report
 
Franklin Resources, Inc. (BEN) : Free Stock Analysis Report
 
Bank OZK (OZK) : Free Stock Analysis Report
 
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