I have been writing a series of articles on community banks. Conservatively run community banks can provide stable and growing dividend income. In general, the banks that I have already written about showed up as one of five banks passing several screens assessing dividend, dividend safety, valuation, and volatility. Most of the banks I have covered are comparatively small with market capitalizations of roughly $500M – $1.2B. At the request of a reader I am writing about Home BancShares Inc (HOMB), a larger community bank with over 150 branches and a market capitalization of over $3B. This bank has a yield of only 2.8% but the dividend is growing at a fast rate of 25%+ in the trailing 5-years. The bank is also seemingly conservatively run with decent credit metrics and capital position.
However, Home BancShares is different than many other community banks in that it is growing rapidly by M&A. Furthermore, the bank is more dependent on interest income and commercial loans than other community banks. Hence, the combination of low yield and greater risks for a community bank means that I am not a buyer of this stock.