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CBTX Hikes Dividend by 30%: Is the Stock Worth Considering?

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·4 min read
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CBTX, Inc.CBTX has raised its quarterly cash dividend by 30% to 13 cents per share. The dividend will be paid out on Apr 15 to its shareholders of record as of Apr 1, 2021.

Prior to this latest hike, the company had raised its dividend in March 2019 by 100% to 10 cents per share. This reflects the bank’s commitment to return value to its shareholders with its gradual cash-generation competencies.
Additionally, considering the last day’s closing price of $30.70 per share, the dividend yield currently stands at 1.7%.

Moreover, CBTX has a share-repurchase plan in place. In September 2020, the company’s board of directors had reinstated its share buyback program, which was temporarily halted in March due to the ambiguities triggered by the COVID-19 pandemic and encircling events.

Further, it had authorized a new buyback plan worth $40 million, which is set to expire on Sep 30, 2021. As of Dec 31, 2020, 1,562,154 shares remained to be repurchased.

Investors interested in this currently Zacks Rank #3 (Hold) stock can have a look at its fundamentals and growth prospects before making any investment decision. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Revenue Growth: CBTX’s revenues witnessed a four-year CAGR of 5.3% (ended 2020) on the back of decent loan demand and support from non-interest income. Although revenues for 2021 are expected to fall 4.4%, the same is expected to grow 1.1% for 2022.

Earnings Strength: CBTX’s earnings have declined 13.4% in the past three-five years. However, the trend is likely to get reversed going forward. The company’s earnings are expected to grow 26.4% and 6.3% in the current year and the following year, respectively.

Impressive Share-Price Movement: CBTX’s shares have surged 104.7% in the past six months, outperforming the 101% rally of the industry it belongs to.

Lower Return on Equity (ROE): The company’s ROE of 4.88% compares unfavorably with the industry’s 8.58%, reflecting that it does not reinvest its cash as efficiently as its peers.

Low Leverage: CBTX’s debt/equity ratio is 0.09 compared with the industry average of 0.21, reflecting a considerably lower debt burden. It highlights the company’s sound financial status even in varied economic cycles.

Stock Seems Overvalued: CBTX currently seems overvalued when compared with the broader industry. It has a price/earnings (F1) ratio of 23.09, above the industry average of 13.90. Also, its price/book ratio of 1.40 compares unfavorably with the industry’s 1.17.

Thus, based on the above-mentioned fundamentals, the stock seems worth holding onto. However, margin pressure due to near-zero interest rates and muted loan demand in the near-term are major concerns for the company. Thus, you must consider these factors before making any decision.

Other Finance Stocks Taking SimilarActions

Since the beginning of 2021, several finance companies have raised their quarterly dividends including Bank OZK OZK, MVB Financial MVBF, T. Rowe Price Group, Inc. TROW among others. Bank OZK hiked 0.9% of its quarterly dividend while MVB Financial increased it 11.1%. Also, T. Rowe Price Group, Inc. announced a 20% rise in its common stock dividend.

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