StoneCastle Financial Corporation Offers Investors 6.8% Dividend Yield (BANX)
By: Ned Piplovic,
StoneCastle Financial Corporation (NASDAQ:BANX) currently offers its shareholders a dividend yield of 6.8%, which is slightly lower than the company’s five-year average dividend yield because of strong share price growth since January 2016.
The company’s total annual dividend payout declined steadily for the first three years after the company’s inception in 2013. However, the company reversed this downtrend and started boosting its annual dividend in the first quarter of 2016.
The share price followed a similar trend. After trading relatively flat for the first six months after the company’s inception, the share price dropped from its all-time high at the end of June 2014, down nearly 47% by mid-January 2016. However, the share price has has recovered more than 63% of its losses since then and is currently trading approximately 17% below its all-time high from June 2014.
Investors looking for a quick turnaround on their investment should consider this equity closely as the company will distribute its next dividend on the June 28, 2018, pay date to all its shareholders of record prior to the ex-dividend date, which will occur just eight days earlier on June 20, 2018.
StoneCastle Financial Corporation (NASDAQ:BANX)
Based in New York, NY, and with an inception date in November 2013, the StoneCastle Financial Corporation is an SEC-registered non-diversified and closed-end investment company. The company’s primary goal is to serve as an investor in healthy community banks seeking capital for organic growth, acquisitions, share repurchases and other refinancing activities. Therefore, the firm generally invest in community banks that have experienced management teams, stable earnings, sustainable markets and growth opportunities. StoneCastle Financial’s primary investment objective is to provide stockholders with current income, and to a lesser extent, capital appreciation, through preferred equity, subordinated debt and common equity investments predominantly in U.S. domiciled community banks. StoneCastle Asset Management, LLC manages the StoneCastle Financial Corporation. As of March 31, 2018, company’s investment mix was comprised of 25.6% in credit securitizations, 20.2% in preferred stock, 17.8% in term loans and other debt securities, 14.0% in trust preferred securities, 11.2% in ETFs, 9.4% in pooled equity interest and 1.8% in common stock and other securities. According to the rating by the Kroll Bond Rating Agency, nearly 90% of the company’s underlying investments have an investment-grade rating — BBB or higher.
The company’s current $0.38 quarterly dividend payout corresponds to a $1.52 annualized distribution in 2018 and converts to a 6.9% dividend yield, which is more than 120% higher than the simple average yield of all the companies in the overall Financials sector.
While StoneCastle Financial’s current $1.52 annual yield is still almost 15% below the company’s $1.78 first-year dividend payout, the quarterly dividend has been rising and the current $0.38 payout amount is 13.2% higher than it was at the end of 2015, which corresponds to an average growth rate of 1.3% per quarter or nearly 5% per year.
However, despite the steady annual dividend payout growth since the end of 2015, StoneCastle Financial’s current 6.8% yield is 4.9% lower than the company’s 7.2% average dividend yield over the past five years. The reason for the slight dividend yield decline is a strong share price growth, which outpaced the dividend growth rate since January 2016.
Since reversing the previous declining trend in January 2016, the share price gained nearly 56%. Just over the past 12 months, the share price rose more than 11%. Because of the steady rising trend, the share price passed through its 52-week low of $19.92 in the first week of the trailing 12-month period on June 16, 2017. The share price continued its stable rise for most of the remainder of the trailing 12 months. With just two brief spikes — one in January and one in March 2018 — the share price rose evenly towards its $20.19 closing price on June 11, 2018. This closing price is just 2% below the 52-week high of $22.64, which occurred during the price spike in March 2018. Additionally, the June 11, 2018, closing price is 11.2% above the 52-week low from June 2017 but 11% below the share price level from five years ago.
While the share price growth was relatively moderate, the 7% dividend yield contributed significantly to the total return of nearly 18% over the past 12 months. The combined total return over the past three years stands at 47.4%.
Dividend increases and dividend decreases, new dividend announcements, dividend suspensions and other dividend changes occur daily. To make sure you don’t miss any important announcements, sign up for our E-mail Alerts. Let us do the hard work of gathering the data and sending the relevant information directly to your inbox.
In addition to E-mail Alerts, you will have access to our powerful dividend research tools. Take a quick video tour of the tools suite.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.