Dividend Kings In Center of attention: Farmers & Traders Bancorp

Up to date on September fifteenth, 2023 by means of Aristofanis Papadatos

The Dividend Kings consist of businesses that experience raised their dividends for no less than 50 years in a row. Lots of the firms have become large multinational firms over the a long time, however now not they all.

You’ll see the total record of all 50 Dividend Kings right here.

We additionally created a complete record of all Dividend Kings, together with related monetary statistics like dividend yields and price-to-earnings ratios. You’ll obtain the total record of Dividend Kings by means of clicking at the hyperlink beneath:

Farmers & Traders Bancorp (FMCB) has paid uninterrupted dividends for 88 consecutive years and has raised its dividend for 58 consecutive years. And but, it has remained a rather small corporate, buying and selling at a marketplace capitalization of simply ~$720 million.

In spite of its small dimension, the corporate has many stuff moving into its prefer, and shareholders will most probably see cast returns. The inventory’s 1.7% dividend yield is fairly upper than the wider marketplace’s 1.5% yield, and there may be room for extra dividend raises down the street.

Industry Review

F&M Financial institution was once based in 1916. It operates 32 branches throughout California’s Central Valley and East Bay spaces. F&M Financial institution is a full-service group financial institution and thus provides loans, deposits, apparatus leasing, and treasury control merchandise to companies, in addition to a complete vary of shopper banking merchandise.

In spite of working simply 32 branches, F&M Financial institution is the 14th biggest financial institution lender to agriculture within the U.S. and has considerably grown its asset base. Actually, overall property have grown by means of 12.5% every year since 2012. And due to its prudent control, F&M Financial institution exhibited exceptional resilience amid the pandemic and all through earlier downturns.

The corporate is conservatively controlled and, till seven years in the past, had now not made an acquisition since 1985. Then again, within the closing seven years, it has aggressively pursued enlargement. It obtained Delta Nationwide Bancorp in 2016 and higher its places by means of 4. Additionally, in October 2018, it finished its acquisition of Financial institution of Rio Vista, which has helped F&M Financial institution to additional extend within the San Francisco East Bay Space.

Supply: Investor Presentation

On July nineteenth, 2023, F&M Financial institution reported monetary effects for the second one quarter of fiscal 2023. F&M Financial institution grew its revenue according to percentage by means of 19% year-over-year, from $23.57 to $28.03.

Internet hobby source of revenue grew 17%, because of 7.4% mortgage enlargement and a variety of internet hobby margin from 3.52% to 4.27%. F&M Financial institution has booked provisions for mortgage losses equivalent to just 2.0% of its overall portfolio, because of its conservative portfolio.

F&M Financial institution has been one of the most easiest performers within the monetary sector within the first part of this 12 months. Maximum banks have incurred a contraction in their internet hobby margin this 12 months because of the next price of deposits amid heating pageant for deposits amongst banks within the present surroundings of 15-year prime rates of interest.

To the contrary, F&M Financial institution has enhanced its internet hobby margin and is heading in the right direction to develop its revenue according to percentage by means of about 10% this 12 months, to a brand new all-time prime.

Control stays constructive for the foreseeable long run, as prime rates of interest have very much enhanced the financial institution’s internet hobby margin. We reiterate that F&M Financial institution is among the maximum resilient banks all through downturns, similar to the good monetary disaster and the pandemic.

Expansion Possibilities

As in the past discussed, F&M Financial institution has pursued enlargement thru acquisitions during the last a number of years after an extended length of no acquisition process stretching again to the Eighties. It obtained Delta Nationwide Bancorp in 2016, and thus it higher the collection of its places by means of 4. Additionally, in past due 2018, it obtained Financial institution of Rio Vista and thus expanded within the San Francisco East Bay Space.

And extra not too long ago, F&M Financial institution obtained Perpetual Financial institution Federal Saving Financial institution and Ossian Monetary Services and products, Inc. in 2021. Additionally, in October 2022, the corporate finished the purchase of Peoples-Sidney Monetary Company. This acquisition is predicted by means of control to spice up the revenue according to percentage by means of 2.5% in 2023 and by means of 3.9% in 2024.

F&M Financial institution has grown its revenue according to percentage at a 13.5% reasonable annual fee since 2013. With the surge of rates of interest to multi-year highs, F&M Financial institution has grown its revenue to an all-time prime stage this 12 months.

Generally, upper rates of interest are a tailwind for banks and folks with prime quantities of property that subsequently earn prime returns. Additionally, when rates of interest are prime, the unfold between banks’ lending fee and borrowing fee will increase and thus expands their internet hobby margin, which is a key element in their revenue. F&M has saved rising its internet hobby margin this 12 months.

Total, we think F&M Financial institution to develop its revenue according to percentage by means of roughly 5% according to 12 months over the following 5 years, because of the constant enlargement of its asset and mortgage portfolios, a conceivable building up within the collection of its bodily places, and the hot acquisition of Peoples-Sidney Monetary Company.

Aggressive Benefits & Recession Efficiency

F&M Financial institution isn’t a giant financial institution in any respect — the corporate’s marketplace cap is only a few hundred million bucks. Nonetheless, the financial institution has been a cast performer for a long time, and it remained solid all through the closing monetary disaster.

F&M Financial institution’s internet revenue declined minimally all through the 2008-2009 recession, with income losing by means of about ten p.c. That very much contrasts with the efficiency of maximum different banks all through that point. Income-per-share all through the Nice Recession are beneath:

• 2007 earnings-per-share of $28.05
• 2008 earnings-per-share of $28.69 (2.3% building up)
• 2009 earnings-per-share of $25.57 (11% decline)
• 2010 earnings-per-share of $27.05 (5.8% building up)

Main banks suffered revenue declines of 80% or much more all through the good monetary disaster. F&M Financial institution, with its focal point on group banking and now not on extra speculative, riskier companies, has been a far more secure funding all through the ones bothered instances.

As F&M Financial institution has now not made any adjustments to its industry fashion since then, it’s nonetheless exceptionally resilient to recessions, a minimum of relative to maximum banks. The financial institution recently has a tier 1 capital ratio of 10.2%, which ends up in the regulatory classification of “effectively capitalized” and has extraordinarily few non-performing loans. It’s thus some of the resilient banks all through a wide variety of downturns.

The conservative control of F&M Financial institution ends up in slower enlargement all through sessions of monetary enlargement however ends up in upper long-term returns because of the awesome returns all through tough financial sessions, when maximum banks see their revenue cave in. The prudent control of F&M Financial institution additionally is helping give an explanation for its outstanding dividend enlargement streak. Maximum banks perform with prime leverage.

Because of this, their revenue stoop all through downturns, and thus those banks can not maintain multi-year dividend enlargement streaks.

Supply: Investor Presentation

F&M Financial institution is a low beta inventory. Which means the inventory charge does now not decline a lot in a marketplace downturn, which makes F&M Financial institution a rather solid, non-volatile preserving. This option is paramount all through extensive marketplace sell-offs, making it more straightforward for traders to steer clear of panic promoting and deal with a long-term making an investment point of view.

Valuation & Anticipated Returns

According to a percentage charge of $955 and anticipated revenue according to percentage of $105.00 this 12 months, F&M Financial institution is buying and selling at a just about 10-year low price-to-earnings ratio of 9.1.

The inventory has traded at a mean price-to-earnings ratio of 13.1 during the last decade, however we think an excellent revenue more than one of 12.0 because of the small marketplace cap of the inventory. If F&M Financial institution reaches our honest worth estimate over the following 5 years, it is going to revel in a 5.7% annualized achieve in its returns because of the growth of its valuation stage.

General returns also are constituted of enlargement of revenue according to percentage and the dividends a inventory can pay. F&M Financial institution recently yields 1.7%, which is fairly upper than the 1.5% reasonable dividend yield of the S&P 500.

Given 5% anticipated earnings-per-share enlargement, the 1.7% dividend, and a 5.7% annualized enlargement of the price-to-earnings ratio, we think F&M Financial institution to supply a 12.3% reasonable annual go back over the following 5 years.

Ultimate Ideas

Because of its small marketplace cap, F&M Financial institution passes beneath the radar of maximum traders. That is unlucky, as F&M Financial institution is an exceptionally well-managed corporate that has additionally begun to pursue enlargement aggressively in the previous few years.

Because of its resilience to recessions, F&M Financial institution provides a compelling risk-adjusted anticipated go back, and thus it’s a fantastic candidate for many who need to achieve publicity to the monetary sector. The inventory earns a purchase ranking round its present inventory charge.

The next articles include shares with very lengthy dividend or company histories, ripe for variety for dividend enlargement traders: