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Is Bank of the Ozarks Stock Worth a Look Post Dividend Hike?

Bank of the Ozarks, Inc. OZRK announced a 2.9% hike in its quarterly cash dividend. The new dividend of 18 cents per share will be paid on Jul 21 to shareholders on record as of Jul 14.

This is the 28th consecutive quarterly increase in dividend by the bank. Based on yesterday’s closing price of $48.23 per share, the dividend yield stands at 1.49%.

Given the strong capital and liquidity position as well as lower debt level compared with the industry peers, the company should continue rewarding shareholders in the quarters ahead. But is it worth considering Bank of the Ozarks stock for earning this dividend income.

Let’s dig deeper into its financial performance and fundamentals to understand the risk and reward.

Driven by de novo branching strategy as well as acquisitions, revenue growth has remained strong at Bank of the Ozarks. The company’s projected sales growth (F1/F0) of 35% is significantly above the industry average of 1.9%. Also, the bank is expected to deliver strong earnings performance as indicated by its projected EPS growth of 16.7% for 2017 compared with the industry average of 8.8%.

However, net interest margin continues to be under strain for Bank of the Ozarks. Despite higher interest rates and economic stability, the company is expected to continue facing margin pressure owing to its liability sensitive balance sheet.

Mounting non-interest expenses is another major concern. As Bank of the Ozarks continues to expand inorganically and through opening branches in newer areas, overall costs should remain elevated in the quarters ahead.

In fact, over the last six months, the stock has lost 10.5% compared with the Zacks categorized Southeast Banks industry’s decline of 2.9%.

Further, Bank of the Ozarks stock looks overvalued based on its price-to-book (P/B) ratio. The company currently has a trailing 12-month P/B ratio of 1.99, which compares with the industry average of 1.53.

Given the concerns, the analysts are bearish on Bank of the Ozarks. Over the last 60 days, the stock has witnessed five downward estimate revisions against no upward revision. The Zacks Consensus Estimate has declined 2% over the same period. Hence, the stock currently carries a Zacks Rank #4 (Sell).

As a result, despite a steady dividend income opportunity, Bank of the Ozarks stock doesn’t appear to be a good investment option now.

Stocks Worth Considering

Some better-ranked stocks in the same industry include Carolina Financial Corporation CARO, State Bank Financial Corporation STBZ and Seacoast Banking Corporation of Florida SBCF. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Carolina Financial’s Zacks Consensus Estimate for the current year remained stable over the past 60 days. Its share price has jumped 79.8% in the last one year.

State Bank Financial has witnessed an upward earnings estimate revision of 1.4% for 2017, over the past 60 days.  Its share price has rallied 40.7% in the last one year.

Seacoast Banking Corporation’s current-year earnings estimates have been revised upward by nearly 1%, over the past 60 days. Its share price has gained 55.6% in the last one year.

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Bank of the Ozarks (OZRK): Free Stock Analysis Report
Seacoast Banking Corporation of Florida (SBCF): Free Stock Analysis Report
Carolina Financial Corporation (CARO): Free Stock Analysis Report
State Bank Financial Corporation. (STBZ): Free Stock Analysis Report
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