CFR - Dividend Champions To Buy Sell And Hold Part 1

October, 24 2022 06:53 PM Cullen/Frost Bankers Inc.

Summary

Dividend Champions are a great list of stocks to study for investment options.
Five years ago, I wrote a series of articles in which I reviewed Dividend Champions from specific industries to determine which stocks are buys, sells, or holds.
For this series of articles, I will be looking back at those articles, reviewing the successes and failures of my rankings, and updating the metrics to make more useful recommendations.
For part 1 of this series, I will be reviewing my picks from the banking industry 5 years ago and making new picks for the next five years.

Overview

In this series of articles, I will be reviewing Dividend Champions from a specific industry and selecting stocks as long-term buys, current holds, or stocks to avoid based on a variety of financial and valuation metrics. More information regarding the Dividend Champions list can be found here .

I believe that one of the best ways to improve is by looking back and reviewing your past work. Because of this for the first five articles of this series, I will be looking back at the prior articles I wrote on this subject five years ago. For Part 1, I will be looking at Dividend Champions from the Banking industry. The related article from five years ago can be found here .

Prior Article Review

In the original article from 2017, there were 12 banking Dividend Champion stocks that I reviewed. Those stocks included:

1st Source ( SRCE )
Chesapeake Financial ( OTCQX:CPKF )
Commerce Bancshares ( CBSH )
Community Trust ( CTBI )
Eagle Financial Services ( OTCQX:EFSI )
Farmers & Merchants ( OTCQX:FMCB )
First Financial ( THFF )
People's United Bancorp - acquired in 2021 by M&T Bank
Tompkins Financial ( TMP )
UMB Financial ( UMBF )
United Bankshares ( UBSI )
Westamerica Bancorp ( WABC )

Based on the metrics I used to review the stocks, the top four scoring stocks were Farmers & Merchants, Chesapeake Financial, Commerce Bancshares, and Eagle Financial Services. The worst-scoring stock was Westameria Bancorp. When looking at each stock's total returns since the publication of the article, the scoring system performed well, but not as well as I would have liked to see. (I am removing "People's United Bancorp" from further analysis since it was acquired in 2021 (in my original article it was ranked 9th out of 12)).

Score Ranking vs Total Returns

In the table below, I am listing the 11 remaining stocks in order of total returns since the original article publication five years ago and comparing that to the score ranking (1 is the highest, 11 lowest) it received at that time.

Stock
Total Return Since 10/13/2017
Score Ranking from 2017 Article
Bank OZK
15.29%
10
30.51%
13
2.08%
16.0
12.38%
10.0
9.49%
5
3.14%
11
73.68%
7.5
9.45
15
1.11
7.75
9
8
112
UMB Financial Corporation
25.19%
15
72.40%
16
1.07%
3.5
14.13%
14.0
12.94%
14
1.69%
3
34.55%
4.5
10.23
12
1.60
4.00
9
8
103
Southside Bancshares, Inc.
14.02%
8
51.58%
15
1.49%
14.5
12.90%
11.0
7.74%
3
3.77%
15
13.33%
2.0
10.64
10
1.57
4.50
8
9
100
BancFirst Corporation
24.18%
14
28.81%
12
1.49%
14.5
14.84%
15.0
13.99%
15
1.47%
1
90.48%
8.0
19.31
2
2.77
1.50
7
10
100
Arrow Financial Corporation
23.40%
13
25.98%
11
1.19%
7.0
13.30%
12.0
11.48%
12
3.37%
12
21.55%
3.0
10.7
9
1.43
5.00
8
7
99
Community Trust Bancorp, Inc.
14.98%
9
21.76%
9
1.45%
12.0
11.99%
6.5
11.20%
11
3.62%
13
33.33%
4.0
10.26
11
1.34
5.50
8
9
98
1st Source Corporation
5.81%
2
31.56%
14
1.46%
13.0
13.39%
13.0
10.75%
10
2.24%
5
60%
7.0
11.87
8
1.67
3.50
9
9
94
First Financial Corporation
15.82%
11
25.79%
10
1.21%
8.5
10.90%
3.0
10.67%
9
2.25%
6
8%
1.5
9.95
13
1.24
6.50
9
9
87
The First of Long Island Corporation
12.24%
7
14.29%
7
1.08%
5.0
11.16%
5.0
6.60%
2
4.45%
16
40%
5.0
9.31
16
1.11
7.75
8
7
86
Enterprise Bancorp, Inc.
21.18%
12
11.72%
5
0.88%
2.0
12.01%
8.0
10.02%
8
2.68%
7
51.85%
6.0
9.47
14
1.27
6.00
9
8
85
Commerce Bancshares, Inc.
7.77%
4
19.77%
8
1.37%
11.0
15.84%
16.0
15.73%
16
1.54%
2
50.32%
5.5
17.66
4
3.49
0.50
9
9
85
United Bankshares, Inc.
34.09%
16
1.18%
3
1.21%
8.5
7.59%
1.0
6.43%
1
3.74%
14
5.88%
1.0
14.93
6
1.15
7.00
9
9
76
Westamerica Bancorporation
8.53%
5
14.05%
6
1.25%
10.0
11.99%
6.5
11.71%
13
2.91%
10
5.00%
0.5
16.91
5
2.51
2.00
7
8
73
Tompkins Financial Corporation
7.29%
3
8.72%
4
1.07%
3.5
12.30%
9.0
9.87%
6
2.90%
9
21.28%
2.5
13.14
7
1.83
3.00
8
7
62
Community Bank System, Inc.
9.26%
6
-0.31%
2
1.14%
6.0
9.02%
2.0
8.92%
4
2.84%
8
29.41%
3.5
18.48
3
1.97
2.50
9
7
53
Cullen/Frost Bankers, Inc.
4.22%
1
-5.09%
1
0.86%
1.0
10.91%
4.0
9.96%
7
2.20%
4
52.63%
6.5
21.86
1
2.85
1.00
9
9
45

Conclusion

The top 4 stocks

Looking at the table above, you can see that the four stocks with the highest overall scores include:

Bank OZK - Total Score of 112
UMB Financial - Total Score of 103
Southside Bancshares, Inc. - Total Score of 100
BancFirst Corp - Total Score of 100

I feel that each of these four stocks are great long-term buy options for investors but selecting which one or which ones to pick will depend on the specific investor's goals. Value investors may want to avoid BancFirst. While it has the highest Momentum Score of the 16 stocks reviewed it is also one of the most expensive stocks based on PE ratio and Price to Book Value. Income investors may want to focus on Bank OZK and Southside Bancshares as these are the two stocks out of the top four that have dividend yields over 3%. And growth investors may want to consider UMB Financial. While it does have a lower dividend yield (under 2%), it does have the highest earnings growth and second-highest revenue growth over the past three years out of the 16 reviewed stocks.

The bottom 4 stocks

The score range from the top stocks to the bottom is fairly drastic. The four lowest score stocks include:

Westamerica Bancorp - Total Score of 73
Tompkins Financial - Total Score of 62
Community Bank System - Total Score of 53
Cullen/Frost Bankers - Total Score of 45

Out of the bottom 4 stocks, I would definitely avoid Community Bank System and Cullen/Frost Bankers. I don't see anything in these two stocks that would give an investor a reason to choose these stocks over the other and it just so happens that these were the only 2 stocks out of the 16 that have had negative earnings growth over the past three years.

Tompkins Financial was one of my higher-ranked stocks in the original article I published five years ago but was the worst-performing stock during that time with just over a 4% return over five years. I can't recommend buying Tompkins Financial this time around but I think it is still a stock that can be held in a diversified long-term portfolio. While its growth has not been strong it has been consistently positive. Its dividend yield is close to 3% and it's right in the middle of the pack in terms of valuation.

Westamerica Bancorp was one of the worst-ranked stocks in my original article but has performed decently over the past five years. Its Momentum Score of 8 shows that this trend can continue. It is another stock I would consider as a hold.

The Remaining Eight

The remaining eight stocks I believe are suitable long-term investment options as well depending on what the individual investor is looking for. Income investors might want to look at First of Long Island with its dividend yield of nearly 4.5%, while dividend growth investors might want to take a look at 1st Source which has grown its dividend by over 60% over the past five years. For investors looking at balance sheets, Commerce Bancshares might be a good bet, considering its impressive returns on assets, equity, and invested capital.

I look forward to comparing the results of this article in another five years and as always, I suggest individual investors perform their own research before making any investment decisions.

For further details see:

Dividend Champions To Buy, Sell, And Hold, Part 1

Company Name:	Cullen/Frost Bankers Inc.
Stock Symbol:	CFR
Market:	NYSE
Website:	frostbank.com

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