Is Bank Of The Ozarks Stock Worth A Look Post Dividend Hike?

 | Jul 04, 2017 08:22AM ET

Bank of the Ozarks, Inc. (NASDAQ:OZRK) announced a 2.9% hike in its quarterly cash dividend. The new dividend of 18 cents per share will be paid on Jul 21 to shareholders on record as of Jul 14.

This is the 28th consecutive quarterly increase in dividend by the bank. Based on yesterday’s closing price of $48.23 per share, the dividend yield stands at 1.49%.

Given the strong capital and liquidity position as well as lower debt level compared with the industry peers, the company should continue rewarding shareholders in the quarters ahead. But is it worth considering Bank of the Ozarks stock for earning this dividend income.

Let’s dig deeper into its financial performance and fundamentals to understand the risk and reward.

Driven by de novo branching strategy as well as acquisitions, revenue growth has remained strong at Bank of the Ozarks. The company’s projected sales growth (F1/F0) of 35% is significantly above the industry average of 1.9%. Also, the bank is expected to deliver strong earnings performance as indicated by its projected EPS growth of 16.7% for 2017 compared with the industry average of 8.8%.

However, net interest margin continues to be under strain for Bank of the Ozarks. Despite higher interest rates and economic stability, the company is expected to continue facing margin pressure owing to its liability sensitive balance sheet.

Mounting non-interest expenses is another major concern. As Bank of the Ozarks continues to expand inorganically and through opening branches in newer areas, overall costs should remain elevated in the quarters ahead.

In fact, over the last six months, the stock has lost 10.5% compared with the Zacks categorized Southeast Banks industry’s decline of 2.9%.