Updated 3/6/25

ConnectOne Bancorp (CNOB) might not be a big-name stock, but for investors focused on dividend income, it offers a mix of stability and potential value. The company operates as a regional bank serving New Jersey and New York, with a strong focus on real estate lending and commercial banking.

With a price-to-book ratio of 0.81 and a dividend yield sitting at 3.02%, this stock might be flying under the radar, but it has some qualities that make it worth a closer look. For those seeking consistent, sustainable dividends with room for moderate growth, CNOB presents an intriguing opportunity.

Key Dividend Metrics

📈 Dividend Yield: 3.02%
💰 Annual Dividend: $0.72 per share
📆 Ex-Dividend Date: February 18, 2025
📊 Payout Ratio: 40.34%
📅 5-Year Dividend Growth Rate: 2.49%
🏦 Dividend Safety: Reasonable, supported by earnings

Dividend Overview

CNOB’s 3.02% yield provides a solid stream of income for investors. While it doesn’t lead the pack in terms of high-yield banking stocks, it remains competitive, especially when compared to its five-year average yield of 2.49%.

One of the more reassuring factors here is the payout ratio, currently sitting at 40.34%. This means the bank is paying out less than half of its earnings in dividends, which suggests it has enough flexibility to sustain its current payouts even if economic conditions become challenging.

Another key date to keep in mind is February 18, 2025, which was the latest ex-dividend date. Investors who owned the stock before then were eligible to receive their next dividend payment on March 3, 2025.

Dividend Growth and Safety

While CNOB isn’t known for aggressive dividend hikes, it has been a steady payer. The five-year average dividend growth rate of 2.49% shows that management is committed to rewarding shareholders, albeit at a slow and steady pace.

The current payout ratio of 40.34% is a healthy level, leaving room for future increases as long as earnings continue to trend upward. This level also gives the company a cushion in case of economic downturns, which is especially important for a regional bank with exposure to real estate lending.

Financially, CNOB remains in decent shape. Return on equity stands at 6.00%, which isn’t overly impressive, but it’s not unusual for a small-cap bank. The company has a cash balance of $393.89 million, giving it some flexibility to handle market fluctuations without putting its dividend at risk.

One area worth keeping an eye on is the debt load. CNOB carries $784.89 million in total debt, which is fairly significant relative to its cash position. However, as long as the bank maintains strong loan performance, it should be able to manage its liabilities without affecting its dividend commitments.

Chart Analysis

Price Action

The stock has been on a strong run since mid-2023, with a significant uptrend that peaked toward the end of the year. Since then, it has pulled back, with the most recent price closing at $19.70 on March 6, 2024. This decline has brought it closer to the 200-day moving average, which is often viewed as a long-term support level.

The 50-day moving average, which had been trending above the 200-day for most of the rally, has now started sloping downward. This suggests that momentum has slowed and could indicate a shift in sentiment. If the stock continues to decline and the 50-day crosses below the 200-day, it could trigger a death cross, a technical signal that sometimes precedes further weakness.

Support and Resistance Levels

The stock has established a key support zone around $19.00 to $19.50, which is where recent lows have been forming. If the stock falls below this level, the next area of potential support could be around $17.50, which was a previous consolidation level before the major uptrend started.

On the upside, resistance is forming near $24.00 to $25.00, an area where the stock previously struggled to hold gains. If the stock can push above this level with strong volume, it could signal a new uptrend.

Volume Trends

Volume has been relatively moderate over the past few weeks, with no major spikes in buying or selling pressure. However, looking back to late 2023, there were multiple instances of large red volume bars, indicating strong selling pressure during declines. The most recent price drop hasn’t been accompanied by a major volume increase, which suggests that sellers are not aggressively dumping shares.

Relative Strength Index (RSI)

The RSI is currently at 39.97, which puts it close to the oversold territory (typically below 30). This suggests that the stock may be approaching a point where it could attract buyers looking for a short-term rebound. However, RSI alone isn’t enough to confirm a reversal—it would need to be accompanied by an increase in buying volume and a strong price move off support levels.

Moving Averages

The 50-day moving average has started trending downward and is now sitting above the current price, acting as resistance. The 200-day moving average, however, remains in an uptrend and is positioned below the price, acting as a longer-term support. The stock is now in a critical zone where it needs to hold above the 200-day moving average to maintain its overall uptrend.

If the stock fails to hold above this level, it could indicate a deeper correction. However, if it bounces back above the 50-day, it could regain momentum for another leg higher.

Analyst Ratings

📈 Recent Upgrades

🔺 Keefe, Bruyette & Woods recently increased their price target for ConnectOne Bancorp (CNOB) from $28.00 to $31.00. This adjustment came as analysts took a more optimistic stance on the bank’s financial outlook. The upgrade was based on strong earnings performance, improved loan portfolio quality, and better-than-expected cost management. Analysts also noted that CNOB’s solid capital position allows it to navigate economic uncertainties better than some of its regional banking peers. While the firm maintained a “Market Perform” rating, the revised target suggests they see additional upside in the stock’s valuation.

📉 Recent Downgrades

🔻 In May 2024, the same firm, Keefe, Bruyette & Woods, lowered their price target for CNOB from $24.00 to $22.00. This downgrade was tied to concerns over loan growth and net interest margin pressures. Analysts expressed caution about a potential slowdown in deposit growth and rising competition in the banking space, which could put pressure on the bank’s profitability. While CNOB remains financially stable, the downgrade reflected the expectation that near-term earnings growth could be weaker than previously projected. Despite these concerns, they still maintained a “Market Perform” rating, suggesting the stock’s movement is expected to align with broader market trends.

🎯 Consensus Price Target

📌 The average twelve-month price target for CNOB currently stands at $28.00, based on multiple analyst evaluations. Individual targets range from $25.00 on the low end to $31.00 on the high end. This suggests a moderate upside potential of approximately 4.24% from current levels. The consensus reflects a mix of optimism and caution, with some analysts seeing room for growth while others remain concerned about near-term banking headwinds.

Earnings Report Summary

ConnectOne Bancorp wrapped up the fourth quarter of 2024 on a positive note, with net income rising to $18.9 million, up from $15.7 million in the previous quarter and $17.8 million in the same quarter last year. That translated into earnings per share (EPS) of $0.49, an improvement from $0.41 in Q3 and $0.46 a year ago.

For the full year, though, the numbers told a slightly different story. Net income for 2024 came in at $67.8 million, which was a step down from $81.0 million in 2023. EPS for the year also dipped, landing at $1.76, compared to $2.07 the year before.

One of the bright spots in the report was the net interest margin, which expanded by nearly 20 basis points. A key driver of this improvement was a reduction in the bank’s average deposit costs, which fell by more than 25 basis points. That means ConnectOne has been able to keep deposit expenses in check while maintaining a strong funding base.

On the fee income side, noninterest income came in at $3.7 million, down from $4.7 million in the prior quarter and $4.2 million a year earlier. The biggest factor behind this decline was a dip in net gains from equity securities, along with lower earnings from Bank-Owned Life Insurance (BOLI) due to fewer death benefit payouts.

Expenses stayed relatively steady, with noninterest expenses totaling $38.5 million for the quarter, just a slight tick down from $38.6 million in Q3. Lower salary and benefits costs helped keep spending in check, though the bank did take a $0.5 million charge related to a branch closure.

Loan quality remains something to watch. The bank set aside $3.5 million for credit losses in Q4, which was down slightly from $3.8 million in the previous quarter but higher than the $2.7 million booked in Q4 of 2023. Nonperforming assets reached $57.3 million, making up 0.58 percent of total assets, a modest increase from earlier in the year.

On the dividend front, the board of directors announced a quarterly cash dividend of $0.18 per share for common shareholders and $0.328125 per share for preferred shareholders. Payments are set to go out on March 1, 2025, to those holding shares as of February 15, 2025.

Looking ahead, the planned merger with The First of Long Island Corporation is moving forward and is expected to close by the second quarter of 2025. If everything goes as planned, this deal could help ConnectOne expand its reach and strengthen its market position.

Financial Health and Stability

Regional banks can be impacted by a range of factors, including interest rate shifts and loan performance. Looking at CNOB’s latest numbers, the company appears to be in stable condition, though there are some areas to watch.

• Profit margin stands at 29.49%, which is solid for the sector.
• Operating margin is at 46.02%, showing that the bank runs efficiently.
• Quarterly revenue growth year-over-year is 2.6%, indicating modest expansion.
• Earnings growth is slightly better, at 5.7% over the same period.

One of the more appealing aspects of CNOB is its valuation. With a book value per share of $29.56 and the stock trading at around $23.65, it’s currently below its tangible asset value. This suggests the market may be undervaluing its financial position.

Debt levels remain something to monitor, with $784.89 million in total obligations. However, with nearly $394 million in cash and a manageable payout ratio, the bank is in a position to continue supporting its dividend even if economic conditions become more challenging.

Valuation and Stock Performance

At its current price of $23.65, CNOB is trading in the lower half of its 52-week range, which spans from $17.07 to $29.31. While the stock has rebounded from its lowest point, it still has room to climb before hitting its yearly high.

From a valuation standpoint, CNOB looks appealing:

• Price-to-earnings (P/E) ratio: 13.56, which is reasonable for a regional bank.
• Price-to-book ratio: 0.81, suggesting it trades at a discount to its assets.
• Price-to-sales ratio: 3.48, aligning with industry norms.

The technical setup shows that the stock’s 50-day moving average is $24.37, while the 200-day moving average is $23.58. Since CNOB is currently hovering around this level, a push above the 50-day could be a signal that momentum is shifting to the upside.

The stock carries a beta of 1.28, meaning it’s slightly more volatile than the broader market. For income investors, this means there could be some swings in price, but as long as the dividend remains stable, the stock’s day-to-day movements may be less of a concern.

Risks and Considerations

Like all regional banks, CNOB faces some challenges that investors should keep in mind.

📉 Interest Rate Sensitivity – Banks are heavily affected by interest rate movements, and CNOB is no exception. Lower rates could support lending activity, but they also reduce margins.

🏦 Loan Portfolio Exposure – Since a large portion of CNOB’s business is tied to real estate lending, a downturn in the housing or commercial property market could put pressure on earnings.

💰 Slower Dividend Growth – While CNOB pays a reliable dividend, growth has been relatively slow. Investors looking for aggressive dividend increases might need to look elsewhere.

📊 Stock Volatility – The stock’s beta of 1.28 indicates that it moves more than the overall market. While not extreme, it’s something income investors should be aware of.

Despite these risks, CNOB has managed to maintain a strong financial position. As long as management remains disciplined and loan performance remains stable, the bank should continue to provide a reliable dividend to investors.

Final Thoughts

For dividend investors, ConnectOne Bancorp is a steady, lower-risk banking stock with an attractive valuation. With a 3.02% yield, a payout ratio of just over 40%, and shares trading below book value, it has the qualities of a solid income investment.

That said, the stock isn’t without its drawbacks. Dividend growth has been modest, and the banking sector faces ongoing challenges with interest rate fluctuations and loan performance. However, for those looking for a stable regional bank that provides a steady payout without excessive risk, CNOB presents an interesting option.

For investors who value consistency and financial strength over rapid dividend growth, this stock offers a mix of security and potential upside if the market begins to revalue regional banks. While it may not be a high-flyer, it’s the kind of stock that can quietly deliver long-term returns for those who prioritize steady income.