This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

5 Bank Stocks That Need a Higher Dividend (Update 1)

5. Prosperity Bancshares

Prosperity Bancshares (PB) of Houston has seen its stock rise 2% year-to-date, closing Friday at $41.32. Based on a quarterly payout of 17.5 cents, the shares have a dividend yield of 1.74%.

The company has been expanding a series of small deals, including an agreement announced on Jan, 19 to buy The Bank Arlington, with one office in Arlington, Texas and total assets of $37 million, following the completed purchase earlier this month of Texas Bankers of Austin, which included three branches and roughly $71 million in assets. Prosperity also has a pending deal announced on Dec. 9, to acquire East Texas Financial Services (EFBT) of Tyler, for about $20 million.

Prosperity reported fourth-quarter net income of $36.4 million, or 77 cents a share, which was flat from the third quarter, but up from $32.8 million, or 70 cents a share, a year earlier.

The company bucked the industry trend, with income from debit card and ATM fees increasing to $4.2 million in the fourth quarter from $3.9 million the previous quarter and $3.3 million a year earlier, despite the Federal Reserve's implementation of the Durbin Rule's limits on debit card interchange fees, on Oct. 1.

Total loans increased slightly during the fourth quarter and 8% year-over-year, to $3.8 billion as of Dec. 31.

Coveted noninterest-bearing deposit balances grew 6% sequentially and 18% year-over-year, to $1.98 billion as of Dec. 31.

The fourth-quarter net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and borrowings -- was 3.82%, narrowing from 4.02% the previous quarter and 3.99% a year earlier, with the fourth-quarter margin "impacted by increased amortization expense from the securities portfolio."

The company's ROA has ranged between 1.41% and 1.50% over the past five quarter, according to HighlineFI.

The shares have a rather high valuation in the current market, reflecting Prosperity's expansion and strong earnings, trading for 3.1 times tangible book value, according to HighlineFI, and for 14 times the consensus 2012 earnings estimate of $3.02 a share, among analysts polled by Thomson Reuters.

Prosperity is clearly a growth story, but the earnings could support a dividend increase.

FBR analyst Scott Valentin on Jan. 23 reiterated his "Market Perform" rating for Prosperity Bancshares, with a price target of $42, describing the company as "among the best-managed institutions in our coverage Universe," and "saying that the company's small recent acquisitions "reflect the company s willingness to transact accretive deals that enhance its deposit franchise, and as an alternative use for capital given the lack of loan growth."

Reversing direction, Valentin added that although the company is expected to continue being "an opportunistic acquirer," Prosperity's "attractive deposit franchise makes the company an attractive takeout target for a larger bank looking for an entry point into the Texas market."

Interested in more on Prosperity Bancshares? See TheStreet Ratings' report card for this stock.

2 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.39 0.00%
EWBC $40.46 0.00%
FITB $18.85 0.00%
JPM $60.58 0.00%
RF $9.45 0.00%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs