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Farmers National (FMNB) Hikes Dividend by 14.3%: Worth a Look?

·4 min read

Farmers National Banc Corp. FMNB has announced a hike in its quarterly dividend. The bank OK'd a dividend of 16 cents per share, representing a 14.3% sequential hike, +45% year-over-year. The dividend will be paid out on Mar 31 to its shareholders of record as of Mar 11, 2022.

The recent dividend hike marks the 7th consecutive quarter of an increase by Farmers National. Prior to this, FMNB hiked the dividend 27% to 14 cents per share. We believe that such disbursements highlight FMNB's operational strength and commitment to enhancing its shareholder wealth.

Considering yesterday's closing price of $17.33 per share, Farmers National's dividend yield currently stands at 3.7%. Not only is the yield attractive for income investors but it also represents a steady income stream.

Management noted, "In fact, our annualized cash dividend payment since 2015 has increased from $0.12 per share, to $0.64 per share representing a compound annual growth rate of 27%. We are proud of this impressive track record, which demonstrates our strong financial performance and commitment to returning capital to our shareholders.”

Can Farmers National Maintain Its Payout?

Farmers National's ability to sustain the hiked dividend depends on the earnings growth rate and the payout ratio. FMNB's current payout ratio of 21.96% is lower than its industry's average of 30.98%, indicating scope for its steady dividend increase.

FMNB has an impressive surprise history. Its earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average being 25.3%.

Farmers National is keen on increasing its asset base, and enhancing its portfolio and balance sheet on the back of acquisitions. In November 2021, FMNB completed the acquisition with Cortland Bancorp Inc., per which Cortland's branches were merged into Farmers National, and The Cortland Savings and Banking Company was merged with Farmers National Bank.

The buyout expands FMNB’s footprint in the strategic Northeast Ohio markets and increases its bank assets to more than $4.1 billion, making it one of the largest community banks in Ohio.

Farmers National also boasts a solid balance sheet. As of Dec 31, 2021, FMNB had average long-term borrowing of $80.8 million, and cash and cash equivalents of $112.8 million. Thus, given a robust liquidity position and a decent earnings strength, FMNB's capital-deployment activities are likely to remain sustainable.

Shares of this currently Zacks Rank #2 (Buy) player have gained 12% in the past six months compared with the industry's growth of 8.4%.

Zacks Investment Research
Zacks Investment Research

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Other Banks Undertaking Enhanced Capital-Deployment Actions

Over the past few months, several companies have rewarded their shareholders with dividend hikes. Some of these are Midland States Bancorp, Inc. MSBI, HomeStreet, Inc.’s HMST and Fidelity National Information Services Inc. FIS. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MSBI declared a quarterly cash dividend of 29 cents per share, up 3.6% from the prior payout. The dividend was paid out on Feb 18 to all its shareholders of record on Feb 11.

This increase represents the 22nd consecutive annual hike in Midland States’ quarterly cash dividend. Prior to this, MSBI had announced a 4.5% rise to 28 cents per share in November 2021.

HMST declared a quarterly dividend of 35 cent per share, representing a hike of 40% from the prior payout. The dividend will be paid out on Feb 23 to its shareholders of record as of Feb 9.

This marks the third dividend hike by HomeStreet. HMST had earlier hiked its dividend 66.7% to 25 cents per share in February 2021.

Consistent with its updated capital-allocation strategy announced in November 2021, Fidelity hiked its quarterly common stock dividend 21% from the prior-quarter payout to 47 cents per share in January this year. The new dividend will be paid out on Mar 29 to its shareholders of record as of Mar 25, 2022.

Since March 2012, Fidelity National has raised its dividend eight times. Its dividend was last hiked in February 2021 by 11% to 39 cents per share.

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Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report

HomeStreet, Inc. (HMST) : Free Stock Analysis Report

Farmers National Banc Corp. (FMNB) : Free Stock Analysis Report

Midland States Bancorp, Inc. (MSBI) : Free Stock Analysis Report

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