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Farmers & Merchants (FMAO) Dividend Hike Fails to Drive Stock

Farmers & Merchants' (FMAO) quarterly dividend hike, along with inorganic expansion efforts and share buyback program, will continue to enhance shareholder value.

This story originally appeared on Zacks

Shares of Farmers & Merchants Bancorp, Inc. FMAO have seen no significant change, although it announced an 11.8% hike in quarterly dividend for the fourth quarter.

Late last week, Farmers & Merchants Bancorp declared a quarterly dividend of 19 cents per share. The dividend will be paid out on Jan 20, 2022, to shareholders on record as of Dec 28, 2021. The increase marks the second quarterly hike this year.

Farmers & Merchants Bancorp’s president and CEO, Lars B. Eller said, “Today’s announcement reflects the positive momentum underway at F&M, as well as the benefits our recent acquisitions are having on earnings. I am extremely proud of our long-standing track record of dividend increases. As our scale and profitability continues to grow, we are committed to returning additional capital to our shareholders.”

Based on the increased rate, the annual dividend came to 76 cents a share, resulting in an annualized dividend yield of 2.47%, considering the company’s yesterday’s closing price of $30.76. The yield is not only attractive to income investors but also represents a steady income stream. It is also impressive compared with the industry’s average of 2.07%.

Prior to the recent hike, Farmers & Merchants Bancorp had announced an increase in its quarterly dividend by 5.9% to 18 cents per share this September. This had represented the 27th consecutive annual rise in the regular dividend payout since 1994.

In addition to the dividend hike, Farmers & Merchants Bancorp has a share repurchase program in place. In January 2021, it had approved a repurchase of up to 0.5 million shares. As of Sep 30, 2021, the company had 0.49 million shares remaining under the program. FMAO’s buyback plan expires on Dec 31, 2021.

Farmers & Merchants Bancorp has also been actively pursuing acquisitions. The company’s last buyout was closed in October, when it acquired Perpetual Federal Savings Bank, Inc. At that time, Ellar had noted, “I am excited to close our third acquisition in the last 12 months. PFSB expands our presence within compelling Ohio markets including Urbana, Dayton, and Sidney, with significant potential for customer growth between Findlay and Urbana.”

So, Farmers & Merchants Bancorp’s robust business model highlights the company’s commitment toward enhancing value to shareholders with its strong cash-generation capabilities.

Over the past six months, Farmers & Merchants Bancorp’s shares have jumped 38.4%, outperforming 7.4% growth recorded by the industry it belongs to.

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Zacks Investment ResearchImage Source: Zacks Investment Research

FMAO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Banks Undertaking Similar Steps

Over the past few months, several banks have rewarded shareholders with dividend hikes. Some of these are Farmers National Banc Corp. FMNB, United Bankshares, Inc. UBSI and The Community Financial Corporation TCFC.

Farmers National announced a sequential hike in the quarterly dividend of 27.3% to 14 cents per share. The dividend will be paid out on Dec 31 to shareholders on record as of Dec 10, 2021.

This marks the sixth consecutive quarter of an increase by Farmers National. Prior to this, FMNB hiked the dividend by 10% to 11 cents per share.

Farmers National’s management noted, “since 2015, our annual cash dividend has increased at an impressive 26% compound annual growth rate, reflecting our strong financial results and commitment to returning capital to shareholders.”

United Bankshares has announced a dividend of 36 cents per share, which represents a hike of 2.9% from the prior payout. The dividend will be paid out on Jan 3, 2022, to shareholders on record as of Dec 2, 2021.

In aggregate, United Bankshares will pay nearly $46.5 million on 129.2 million shares. Prior to the recent hike, UBSI had announced an increase in its quarterly dividend by 2.9% to 35 cents per share in November 2019.

Community Financial has announced a 17% sequential hike in the quarterly cash dividend. The company will now pay a dividend of 17.5 cents per share. The dividend will be paid out on Jan 24 to shareholders on record as of Jan 10, 2022.

TCFC’s management noted, "Our performance in the past year has been exceptional, despite many pandemic related challenges felt across the industry and Country. This increase in the quarterly dividend reflects the strong financial position of the Company and our continued commitment to returning value to shareholders."

Earlier in February, Community Financial had hiked its dividend by 20% to 15 cents per share.

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United Bankshares, Inc. (UBSI): Free Stock Analysis Report


The Community Financial Corporation (TCFC): Free Stock Analysis Report


Farmers & Merchants Bancorp Inc. (FMAO): Free Stock Analysis Report


Farmers National Banc Corp. (FMNB): Free Stock Analysis Report


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