Cullen/Frost Hikes Dividend - Analyst Blog

Cullen/Frost Bankers, Inc. CFR raised its common stock dividend by 2.0% to 51 cents per share on Thursday. The dividend will be paid on Jun 13 to shareholders of record as of May 30. The dividend hike followed the company's first-quarter earnings release on Wednesday.

This San Antonio, TX-based financial services leader has a history of regularly raising its dividend. In fact, this Southwest bank continued to hike dividend even amid the financial crisis of 2008. Notably, the latest hike marks the 20th consecutive yearly increase in dividend. This consistency in dividend hike reflects the company's commitment to enhance shareholders' value with its capital strength. Prior to this, Cullen/Frost had raised dividend by 4.2% (from 48 cents to 50 cents per share) in May 2013.

The company has an impressive business model, which enables it to strengthen its balance sheet and efficiently deploy capital. An improving top line, rise in loans and deposits as well as strong capital position should enable Cullen/Frost to maintain its growth momentum. Moreover, we believe that strategic acquisitions will expand the company's business and improve its profitability over time. However, continuously rising operating expenses reflect undisciplined expense management. Additionally, the company needs to counter the persistent rise in provision for credit losses.

Furthermore, a tepid economic recovery, low interest-rate environment and regulatory pressure could limit the company's growth.

At present, Cullen/Frost carries a Zacks Rank #3 (Hold). We believe that announcement of the dividend hike will boost shareholders' confidence.

Some better-ranked Southwest bank stocks include BancFirst Corporation BANF, BOK Financial Corporation BOKF and First Financial Bankshares Inc. FFIN. All these have a Zacks Rank #2 (Buy).