Updated 3/7/25
Cullen/Frost Bankers, Inc. (NYSE: CFR) is a well-respected regional bank based in Texas with a long history of financial stability and strong customer relationships. Known for its conservative banking practices, CFR has managed to thrive in various economic environments while steadily rewarding shareholders.
For dividend investors, this stock presents an intriguing opportunity. With a track record of consistent payouts and a commitment to long-term growth, CFR has become a staple for those seeking reliable income. But is it still a good investment at current levels? Let’s take a closer look at its dividend profile, financial health, and potential risks.
Key Dividend Metrics
📈 Dividend Yield: 2.97%
💰 Annual Dividend: $3.80 per share
📆 Ex-Dividend Date: February 28, 2025
🏦 Payout Ratio: 42.16% (well-supported by earnings)
📊 5-Year Average Yield: 3.02%
🚀 Consecutive Dividend Increases: Over 29 years
Dividend Overview
Cullen/Frost has earned a reputation as a dependable dividend payer. Currently yielding 2.97%, its dividend remains in line with its five-year average, showing consistency over time. The company’s most recent annual dividend stands at $3.80 per share, continuing its long tradition of rewarding shareholders.
A key strength of CFR is its ability to sustain and grow its dividend. With an ex-dividend date of February 28, 2025, investors looking to collect the next payout need to own shares before that deadline. The bank’s payout ratio of 42.16% is a comfortable level, meaning the dividend is well-covered by earnings without stretching the company’s financials too thin.
Dividend Growth and Safety
For income investors, dividend safety is just as important as the yield itself. Cullen/Frost has consistently increased its dividend for nearly three decades, making it a strong candidate for a dividend growth portfolio.
Several factors contribute to its ability to maintain and grow dividends:
- Earnings Growth: The company’s quarterly earnings have grown by 51% year-over-year, supporting future dividend increases.
- Profitability: A strong profit margin of 29.15% and a return on equity (ROE) of 15.3% indicate efficient operations.
- Cash Reserves: With $10.4 billion in cash, CFR has more than enough liquidity to continue paying and increasing dividends.
For investors focused on long-term income, this level of financial discipline provides peace of mind.
Chart Analysis
Price Action
The chart for Cullen/Frost Bankers, Inc. (CFR) shows a strong uptrend that began around mid-year, pushing the stock significantly higher before encountering resistance near the $140 level. Recently, the stock has pulled back, dropping below its 50-day moving average, which could indicate a shift in momentum. The latest close at $127.86 suggests that the stock is testing a potential support zone.
Moving Averages
The 50-day moving average (orange line) has been trending above the 200-day moving average (blue line) for several months, a classic sign of a sustained uptrend. However, the recent dip below the 50-day line raises questions about whether the stock is entering a consolidation phase or a deeper correction. The 200-day moving average is still trending upward, which suggests that the longer-term outlook remains positive despite the short-term weakness.
Volume Trends
Trading volume appears to have spiked at key moments, particularly during the initial breakout and subsequent pullbacks. Recently, volume has been relatively stable but lacks the aggressive buying seen earlier in the uptrend. This could indicate that buyers are waiting for more clarity before stepping back in.
Relative Strength Index (RSI)
The RSI indicator has been declining, moving closer to oversold territory. This suggests that selling pressure has been increasing, though the stock hasn’t yet reached extreme levels where a bounce would be expected. If RSI continues to drop below 30, it could indicate that the stock is nearing a potential reversal point.
Recent Candlestick Patterns
The last five candles show a mix of price action, with some longer upper wicks suggesting selling pressure at higher levels. The presence of lower wicks in a few sessions indicates that buyers are stepping in at certain points, but they haven’t been strong enough to regain upward momentum. The most recent candle closed near its low, which may signal continued weakness in the short term.
Analyst Ratings
Cullen/Frost Bankers, Inc. (CFR) has recently experienced a range of analyst opinions, reflecting both positive and cautious sentiments about its future performance.
Upgrades:
- Evercore ISI Group: On February 10, 2025, Evercore ISI Group maintained its ‘Sell’ rating but raised the price target from $136 to $144. This adjustment suggests a more favorable outlook on the stock’s valuation, possibly due to improved financial metrics or market conditions.
- Keefe, Bruyette & Woods: On February 3, 2025, Keefe, Bruyette & Woods reiterated their ‘Hold’ rating and increased the price target from $140 to $148. This upward revision indicates a recognition of the bank’s stable performance and potential for modest growth.
Downgrades:
- DA Davidson: On February 3, 2025, DA Davidson downgraded CFR from ‘Strong Buy’ to ‘Hold’ while slightly raising the price target from $138 to $143. This shift suggests a more cautious stance, possibly due to concerns about market volatility or sector-specific challenges.
As of the latest consensus, the average price target for CFR stands at $133.88, based on evaluations from 19 analysts. The targets range from a high of $155 to a low of $108, reflecting varied perspectives on the bank’s prospects.
The reasons behind these upgrades and downgrades vary. Upgrades often stem from positive financial results, improved economic indicators, or strategic initiatives that enhance profitability. Conversely, downgrades may result from concerns about loan performance, regulatory changes, or broader economic uncertainties that could impact the bank’s earnings.
In summary, while some analysts have expressed increased confidence in CFR’s valuation and growth potential, others have adopted a more cautious approach, reflecting a balanced view of the bank’s future performance.
Earnings Report Summary
Cullen/Frost Bankers wrapped up the fourth quarter of 2024 with solid numbers, showing strong growth in key areas. The company reported net income of 153.2 million, or 2.36 per share, which is a significant jump from 100.9 million and 1.55 per share in the same quarter last year. However, it’s worth noting that last year’s numbers were impacted by a hefty 51.5 million FDIC special surcharge, so the year-over-year comparison isn’t quite apples to apples.
For the full year, net income came in at 575.9 million, which is down 2.6 percent from 591.3 million in 2023. On a per-share basis, earnings were 8.87, a slight dip from 9.10 the previous year. Again, part of this decline is due to regulatory costs, so it doesn’t necessarily reflect operational weakness.
One of the more encouraging signs in the report was loan growth. Average loans for the quarter climbed by 9.3 percent to hit 20.3 billion, fueled by expansion efforts in key Texas markets like Austin, Dallas, and Houston. Deposits also grew, increasing by 1.7 percent to 41.9 billion, which shows the bank is maintaining strong customer relationships and trust.
Net interest income, a crucial measure of profitability for banks, was 433.7 million, marking a 5.8 percent increase from last year. Even better, the net interest margin, which measures how much the bank earns from lending versus what it pays on deposits, ticked up to 3.53 percent, compared to 3.41 percent last year. That’s a healthy sign that the bank is effectively managing its loan book and deposit base.
On the non-interest income side, revenue from things like trust services, deposit fees, and commissions climbed 8 percent to 122.8 million. This part of the business is often overlooked, but it’s a great sign that the bank isn’t just relying on traditional lending to drive profits.
Overall, Cullen/Frost delivered a strong quarter, balancing loan and deposit growth with improved margins. While regulatory costs had some impact, the bank’s ability to grow earnings, expand into new markets, and manage profitability remains intact.
Financial Health and Stability
One reason Cullen/Frost has been such a reliable dividend payer is its strong financial foundation. Unlike some banks that chase high-risk strategies, CFR has remained disciplined in its lending practices, prioritizing stability over aggressive expansion.
Here are some key financial highlights:
- Total Revenue: $2 billion over the past 12 months
- Net Income: $569.63 million
- Profit Margin: 29.15% (healthy for a regional bank)
- Return on Assets (ROA): 1.13%, reflecting solid asset efficiency
- Return on Equity (ROE): 15.3%, indicating strong profitability
The company also maintains a conservative balance sheet, with more cash on hand than total debt. CFR holds $10.4 billion in cash compared to $5.02 billion in debt, demonstrating its ability to weather economic fluctuations without putting its dividend at risk.
Valuation and Stock Performance
Cullen/Frost is currently trading at $129.61 per share, with a price-to-earnings (P/E) ratio of 14.41 on a trailing basis and 14.62 forward. These numbers suggest that the stock is fairly priced, though not necessarily a deep value play.
Other valuation metrics:
- Price-to-Book (P/B) Ratio: 2.19x, slightly above historical levels
- Price-to-Sales (P/S) Ratio: 3.98x, reflecting a premium valuation
- 52-Week Range: $94.09 – $147.64
While the stock has rebounded 37.77% from its 52-week low, it still trades below its yearly high. Its 50-day moving average sits at $137.91, while the 200-day moving average is $121.28, suggesting near-term resistance at higher levels.
For long-term investors, the valuation remains reasonable, especially given CFR’s ability to generate consistent income.
Risks and Considerations
Even strong dividend stocks come with risks. Here are some factors to keep in mind:
- Interest Rate Sensitivity: As a regional bank, CFR’s earnings depend on interest rates. A sharp decline could compress margins and impact profitability.
- Geographic Concentration: The bank’s operations are primarily in Texas, meaning its performance is tied to the state’s economic conditions, particularly the energy sector.
- Loan Performance: If credit conditions deteriorate, an increase in loan defaults could put pressure on earnings.
- Valuation: The stock is not deeply discounted, so future gains may depend on continued earnings growth.
Despite these risks, CFR’s strong balance sheet and prudent management help mitigate major concerns.
Final Thoughts
Cullen/Frost Bankers, Inc. has proven itself as a reliable dividend stock, offering steady income, strong financials, and consistent dividend growth. Its conservative approach to banking has allowed it to navigate economic cycles while rewarding long-term investors.
While the stock isn’t trading at a deep discount, its healthy payout ratio, cash reserves, and growth potential make it an attractive option for those seeking a balance of stability and income. For dividend-focused investors, CFR remains a solid choice in a well-diversified portfolio.
Recent Comments